<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 23, 1996
REGISTRATION NO. 333-17173
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
NEXTEL COMMUNICATIONS, INC.
(Exact Name of Registrant as Specified in Its Charter)
<TABLE>
<S> <C> <C>
DELAWARE 4812 36-3939651
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code) Identification Number)
</TABLE>
------------------------
1505 Farm Credit Drive
McLean, Virginia 22102
(703) 394-3000
(Address, Including Zip Code, and Telephone Number, Including
Area Code, of Registrant's Principal Executive Offices)
------------------------
Thomas J. Sidman, Esq.
Vice President and General Counsel
Nextel Communications, Inc.
1505 Farm Credit Drive
McLean, Virginia 22102
(703) 394-3000
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent For Service)
------------------------
Copies to:
<TABLE>
<S> <C> <C>
Lisa A. Stater, Esq. Craig E. Sherman, Esq. William J. Phillips, Esq.
Jones, Day, Reavis & Pogue Venture Law Group Dewey Ballantine
3500 One Peachtree Center 4750 Carillon Point 1301 Avenue of the Americas
303 Peachtree Street Kirkland, Washington 98033 New York, New York 10019
Atlanta, Georgia 30308 (206) 739-8700 (212) 259-8000
(404) 521-3939
</TABLE>
------------------------
Approximate date of commencement of proposed sale to the public: As soon as
practicable following the effective date of this Registration Statement.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box: [ ]
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<PAGE> 2
WIRELESS VENTURES OF BRAZIL, INC.
ARLINGTON COURTHOUSE PLAZA II
2300 CLARENDON BOULEVARD -- SUITE 800
ARLINGTON, VA 22201
December 23, 1996
To the Shareholders of Wireless Ventures of Brazil, Inc.:
You are cordially invited to attend a Special Meeting of Shareholders (the
"Special Meeting") of Wireless Ventures of Brazil, Inc. ("WVB") to be held on
January 24, 1997, at 10:00 a.m. (local time), at Arlington Courthouse Plaza II,
2300 Clarendon Boulevard, Suite 800, Arlington, Virginia 22201.
You have previously been furnished with a Notice of Special Meeting
describing the matters to be voted upon at the Special Meeting: (1) the proposed
adoption of an amendment to the WVB Articles of Incorporation to recapitalize
WVB, and (2) the proposed adoption of an Agreement and Plan of Merger between
WVB, Nextel Communications, Inc. ("Nextel"), and a subsidiary of Nextel.
The enclosed Proxy Statement/Prospectus contains important information
relating to these matters, which will be acted upon at the Special Meeting, and
also constitutes a prospectus relating to shares of Class A Common Stock, par
value $0.001 per share, of Nextel that, upon consummation of the proposed merger
of a subsidiary of Nextel with and into WVB, would be issued in exchange for
outstanding shares and options to acquire shares of WVB stock, and in respect of
a promissory note of WVB.
Your participation in the Special Meeting, in person or by proxy, is
important. In order to ensure that your interests are represented at the Special
Meeting, please complete, sign, date and return the accompanying Proxy in the
enclosed envelope, whether or not you plan to attend the Special Meeting. If you
attend the Special Meeting in person you may, if you wish, vote personally on
all matters brought before the Special Meeting even if you have previously
returned your Proxy.
Sincerely,
HAL B. PERKINS
Hal B. Perkins
Assistant Secretary
<PAGE> 3
PROXY STATEMENT OF
WIRELESS VENTURES OF BRAZIL, INC.
FOR SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD JANUARY 24, 1997
------------------------------------------------------
PROSPECTUS
OF
NEXTEL COMMUNICATIONS, INC.
Relating to the Offering of up to 11,963,877 Shares of Class A Common
Stock, Par Value $.001 Per Share
------------------------
This Proxy Statement of Wireless Ventures of Brazil, Inc. a Virginia
corporation ("WVB"), and Prospectus of Nextel Communications, Inc., a Delaware
corporation ("Nextel" or the "Company") (the "Proxy Statement/Prospectus") is
being furnished to the holders of common stock of WVB, par value $.01 per share
(the "WVB Common Stock"), in connection with the solicitation of proxies by the
Board of Directors of WVB (the "WVB Board") for use at the special meeting of
shareholders of WVB to be held at 10:00 a.m. on January 24, 1997 at Arlington
Courthouse Plaza II, 2300 Clarendon Boulevard, Suite 800, Arlington, Virginia
22201 and any adjournments or postponements thereof (the "Special Meeting").
At the Special Meeting, Shareholders of WVB (the "WVB Shareholders") will
consider and vote upon two proposals: (1) a proposal to recapitalize WVB by
converting each outstanding share of WVB Common Stock into 81 shares of WVB
Class A Common Stock, par value $0.01 per share (the "WVB Class A Common Stock")
and 19 shares of WVB Class B Common Stock, par value $0.01 per share (the "WVB
Class B Common Stock") and (2) a proposal to approve the Agreement and Plan of
Merger dated as of October 28, 1996, as amended, by and among Nextel, Dial Call
Indimich, Inc., a Delaware corporation and a wholly owned subsidiary of Nextel
("DCI"), and WVB (the "Merger Agreement"), pursuant to which, among other
things, DCI will be merged with and into WVB (the "Merger") and up to 11,963,877
shares of Nextel's Class A Common Stock, par value $.001 per share (the "Nextel
Common Stock") will be issued to the holders of then issued and outstanding
shares of WVB Class A Common Stock, to holders of options to acquire WVB Common
Stock (the "WVB Options") and to the holder of a promissory note issued by WVB
(the "WVB Note"), all pursuant to the terms of the Merger Agreement.
FOR A MORE COMPLETE DESCRIPTION OF THE TERMS OF THE MERGER, INCLUDING A
DESCRIPTION OF THE CONSIDERATION TO BE RECEIVED BY WVB SHAREHOLDERS, SEE "THE
MERGER -- TERMS OF THE MERGER -- DETERMINATION OF MERGER CONSIDERATION."
Shares of Nextel Common Stock are quoted on the Nasdaq Stock Market ("NSM")
under the symbol "CALL." There is no public trading market for WVB Common Stock.
This Proxy Statement/Prospectus is first being mailed to the WVB
Shareholders on or about December 23, 1996.
------------------------
SEE "RISK FACTORS," BEGINNING ON PAGE 14 OF THIS PROXY
STATEMENT/PROSPECTUS, FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE
CONSIDERED BY WVB SHAREHOLDERS IN CONNECTION WITH THE MATTERS THEY ARE BEING
ASKED TO VOTE ON, INCLUDING THEIR PROSPECTIVE INVESTMENT IN SHARES OF NEXTEL
COMMON STOCK BEING OFFERED HEREBY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Proxy Statement/Prospectus is December 23, 1996.
<PAGE> 4
AVAILABLE INFORMATION
Nextel is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended, and the rules and regulations promulgated
thereunder (collectively, the "Exchange Act") and, in accordance therewith,
files reports, proxy statements and other information with the Securities and
Exchange Commission (the "Commission"). Such reports, proxy statements and other
information filed with the Commission can be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, 450 Fifth
Street, N.W., Judiciary Plaza, Washington, D.C. 20549, and at the Commission's
Regional Offices at 7 World Trade Center, 13th Floor, New York, New York 10048,
and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661. Copies of such material also may be obtained by mail from the Public
Reference Section of the Commission, Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. Additionally, the Commission
maintains a Web site on the Internet, that contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the Commission and that is located at http://www.sec.gov.
The Company has filed with the Commission a Registration Statement on Form
S-4 (including the exhibits and amendments thereto, the "Registration
Statement") pursuant to the requirements of the Securities Act of 1933, as
amended (the "Securities Act") with respect to the shares of Nextel Common Stock
offered hereby. This Proxy Statement/Prospectus does not contain all the
information set forth in the Registration Statement, certain portions of which
are omitted in accordance with the rules and regulations of the Commission and
to which reference is hereby made. Statements made in this Proxy
Statement/Prospectus as to the contents of any contract, agreement or other
document referred to herein are not necessarily complete. With respect to each
such contract, agreement or other document filed or incorporated by reference as
an exhibit to the Registration Statement or as an exhibit to documents
incorporated by reference in this Proxy Statement/Prospectus (see "Incorporation
of Certain Information by Reference"), reference is made to the respective
exhibit for a more complete description of the matter involved, and each such
statement shall be deemed qualified in its entirety by such reference. Copies of
the Registration Statement together with exhibits may be inspected at the office
of the Commission in Washington, D.C. without charge and copies thereof may be
obtained therefrom upon payment of a prescribed fee.
All information contained in this Proxy Statement/Prospectus relating to
WVB and all information regarding the proposed recapitalization of WVB has been
supplied by WVB, all information regarding the Merger has been supplied by
Nextel and WVB and all other information has been supplied by Nextel.
NO PERSONS HAVE BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS PROXY STATEMENT/PROSPECTUS
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY NEXTEL OR WVB. THIS PROXY STATEMENT/PROSPECTUS
DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY
SECURITIES IN ANY JURISDICTION TO OR FROM ANY PERSON TO WHOM IT IS NOT LAWFUL TO
MAKE ANY SUCH OFFER OR SOLICITATION IN SUCH JURISDICTION. NEITHER THE DELIVERY
OF THIS PROXY STATEMENT/PROSPECTUS NOR ANY DISTRIBUTION OF SECURITIES MADE
HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE AN IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE FACTS SET FORTH IN THIS PROXY STATEMENT/PROSPECTUS OR THE
AFFAIRS OF NEXTEL OR WVB SINCE THE DATE HEREOF OR THAT THE INFORMATION HEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
THIS PROXY STATEMENT/PROSPECTUS INCORPORATES CERTAIN DOCUMENTS BY REFERENCE
WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. SUCH DOCUMENTS (OTHER THAN
EXHIBITS TO SUCH DOCUMENTS UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED BY
REFERENCE) ARE AVAILABLE WITHOUT CHARGE TO ANY PERSON TO WHOM THIS PROXY
STATEMENT/PROSPECTUS IS DELIVERED UPON WRITTEN OR ORAL REQUEST DIRECTED TO
NEXTEL COMMUNICATIONS, INC., 1505 FARM CREDIT DRIVE, MCLEAN, VIRGINIA 22102,
ATTENTION: INVESTOR RELATIONS, TELEPHONE: (703) 394-3500. IN ORDER TO ENSURE
TIMELY DELIVERY OF THE DOCUMENTS, ANY REQUEST SHOULD BE MADE BY JANUARY 16,
1996.
The information in the following documents filed by Nextel with the
Commission (File No. 0-19656) pursuant to the Exchange Act is incorporated by
reference in this Prospectus:
2
<PAGE> 5
(a) Annual Report on Form 10-K for the year ended December 31, 1995 filed
with the Commission on April 1, 1996, as amended by Form 10-K/A filed
with the Commission on April 26, 1996 and as further amended by Form
10-K/A2 filed with the Commission on May 17, 1996;
(b) Quarterly Reports on Form 10-Q for the quarter ended March 31, 1996
filed with the Commission on May 12, 1996, for the quarter ended June
30, 1996 filed with the Commission on August 13, 1996 and for the
quarter ended September 30, 1996 filed with the Commission on November
14, 1996;
(c) Current Reports on Form 8-K: (i) dated February 6, 1996 and filed with
the Commission on February 7, 1996, as amended by Form 8-K/A, filed on
April 26, 1996, (ii) dated February 9, 1996 and filed with the
Commission on February 12, 1996, (iii) dated March 13, 1996 and filed
with the Commission on March 15, 1996, (iv) dated and filed with the
Commission on July 5, 1996, (v) dated and filed with the Commission on
August 30, 1996, (vi) dated September 30, 1996 and filed with the
Commission on October 1, 1996, (vii) dated and filed with the
Commission on October 3, 1996, (viii) dated and filed with the
Commission on November 4, 1996; and (ix) dated November 22, 1996 and
filed with the Commission on November 26, 1996; and
(d) Registration Statement on Form S-1, as amended, dated as of January 27,
1992 (No. 33-43415), with respect to the information contained under
the heading "Description of Capital Stock" which was incorporated by
reference into the Registration Statement on Form 8-A, dated January
16, 1992.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Proxy
Statement/Prospectus and prior to the termination of this offering shall be
deemed to be incorporated by reference in this Proxy Statement/Prospectus and to
be a part thereof from the date of filing of such documents.
Any statements made herein or in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Proxy Statement/Prospectus to the extent that a statement
contained herein or in any other subsequently filed document which is also
incorporated or deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of this
Proxy Statement/Prospectus.
The information relating to Nextel contained in this Proxy
Statement/Prospectus should be read together with the information in the
documents incorporated by reference.
3
<PAGE> 6
TABLE OF CONTENTS
<TABLE>
<S> <C>
AVAILABLE INFORMATION...................................................................... 2
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE.......................................... 2
SUMMARY.................................................................................... 6
A. RECAPITALIZATION OF WVB............................................................. 6
B. THE PARTIES TO THE MERGER........................................................... 7
Nextel............................................................................ 7
WVB............................................................................... 7
C. THE MERGER.......................................................................... 8
Effective Time of the Merger...................................................... 8
Terms of the Merger............................................................... 8
Special Meeting; Vote Required.................................................... 9
Background; Reasons for the Merger; Recommendation of the WVB Board............... 9
Exchange of Stock Certificates.................................................... 9
Limitations on Transferability of Shares.......................................... 10
Conditions to the Merger; Termination............................................. 10
Indemnification................................................................... 10
Dissenters Rights................................................................. 10
Certain Federal Income Tax Consequences........................................... 11
Accounting Treatment.............................................................. 11
Regulatory Approvals.............................................................. 11
Certain Differences in Rights of Shareholders..................................... 11
Additional Agreements............................................................. 11
D. MARKET INFORMATION.................................................................. 12
E. COMPARATIVE UNAUDITED HISTORICAL AND PRO FORMA PER SHARE INFORMATION................ 13
RISK FACTORS............................................................................... 14
History of and Future Expectations of Losses and Negative Cash Flow.................... 14
Risks of Implementation of Digital Mobile Networks..................................... 14
Implementation of Digital Mobile Networks Subject to Risks of Developing Technology.... 15
Nextel to Require Financing............................................................ 18
Success of Nextel is Dependent on its Ability to Compete............................... 21
Reliance on One Principal Supplier in Implementation of Digital Mobile Networks........ 24
Nextel's Prospects Are Dependent on Governmental Regulation............................ 25
Nextel's Assets Primarily Consist of Intangible FCC Licenses........................... 27
Nextel Susceptible to Control by Significant Stockholders.............................. 27
Potential Dilution from Pending and Future Transactions................................ 29
Shares Eligible for Future Sale........................................................ 29
Dividend Policy Limits Expectation of Future Dividends................................. 30
Potential Conflict of Interest Relationship With Motorola May Affect Nextel's
Prospects............................................................................ 30
Concerns About Mobile Communications Health Risk May Affect Prospects of Nextel........ 30
Forward-Looking Statements............................................................. 31
THE RECAPITALIZATION....................................................................... 32
THE MERGER................................................................................. 32
Background of the Merger............................................................... 32
Recommendation of the WVB Board; Reasons for the Merger................................ 33
Terms of the Merger.................................................................... 33
General........................................................................... 33
Effective Time of the Merger...................................................... 33
Determination of Merger Consideration............................................. 34
Fractional Shares................................................................. 34
Articles of Incorporation and Bylaws.............................................. 35
Exchange of Certificates.......................................................... 35
Limitations on Transferability of Nextel Common Stock and New Class B Common
Stock............................................................................. 36
Conditions to the Merger.......................................................... 36
Certain Covenants................................................................. 37
Indemnification................................................................... 37
Amendment and Termination......................................................... 38
Additional Agreements............................................................. 39
Shareholders Agreement................................................................. 39
Transfer Restrictions............................................................. 39
Tag-along and Drag-along Rights................................................... 39
Voting and Directors.............................................................. 40
Capital Calls and Preemptive Rights............................................... 40
</TABLE>
4
<PAGE> 7
<TABLE>
<S> <C>
Registration Rights............................................................... 40
Repurchase Rights................................................................. 40
Noncompetition.................................................................... 40
Termination....................................................................... 40
Dissenters' Rights..................................................................... 41
Certain Federal Income Tax Consequences................................................ 43
Interests of Certain Persons in the Merger............................................. 44
Accounting Treatment................................................................... 45
Regulatory Approvals................................................................... 45
Certain Differences in Rights of Shareholders.......................................... 45
Introduction...................................................................... 45
Authorized Capital Stock.......................................................... 46
Board or Stockholder Approved Preferred Stock..................................... 46
Terms of Nextel Preferred Stock................................................... 46
Redemption of WVB Class B Common Stock............................................ 48
Voting Rights..................................................................... 48
Number of Directors............................................................... 49
Election of Board of Directors.................................................... 50
Vote on Merger, Consolidation or Sale of Substantially All Assets................. 51
Special Meetings of Stockholders.................................................. 51
Stockholder Action by Written Consent............................................. 51
Amendment of Certificate of Incorporation......................................... 52
Amendment of By-laws.............................................................. 52
Certain Limitations Related to the McCaw Transaction.............................. 53
Director of Elected by WVB Class B Common Stockholders............................ 53
Liability and Indemnification of Officers and Directors........................... 53
Dissenters' Rights................................................................ 54
Payment of Dividends.............................................................. 55
Distributions Upon Liquidation.................................................... 55
Compromise and Reorganization..................................................... 55
THE SPECIAL MEETING........................................................................ 56
General................................................................................ 56
Date, Place and Time................................................................... 56
Record Date; Vote Required............................................................. 56
Proxies and Revocation................................................................. 56
BENEFICIAL OWNERSHIP OF WVB COMMON STOCK................................................... 57
BENEFICIAL OWNERSHIP OF NEXTEL COMMON STOCK................................................ 57
NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES SELECTED FINANCIAL DATA....................... 60
WIRELESS VENTURES OF BRAZIL, INC. AND SUBSIDIARIES SELECTED FINANCIAL DATA................. 61
WVB MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS............................................................................... 62
Overview............................................................................... 62
Results of Operations.................................................................. 62
Liquidity and Capital Resources........................................................ 63
Inflation.............................................................................. 64
INFORMATION ABOUT WVB...................................................................... 64
MATERIAL CONTRACTS AND OTHER RELATIONSHIPS BETWEEN NEXTEL AND WVB AND THEIR RESPECTIVE
AFFILIATES............................................................................... 65
LEGAL MATTERS.............................................................................. 66
EXPERTS.................................................................................... 66
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS OF WVB.......................................... F-1
Annex A Agreement and Plan of Merger dated as of October 28, 1996, as amended, by and
among Nextel, DCI and WVB..................................................... A-1
Annex B Articles of Amendment to the Articles of Incorporation of Wireless Ventures of
Brazil, Inc. (to effect the Recapitalization)................................. B-1
Annex C Articles of Amendment to the Articles of Incorporation of Wireless Ventures of
Brazil, Inc. (to be adopted following the Merger)............................. C-1
Annex D Bylaws of Wireless Ventures of Brazil, Inc. .................................... D-1
Annex E Article 15 of the Virginia Stock Corporation Act................................ E-1
Annex F Form of Shareholders Agreement.................................................. F-1
</TABLE>
5
<PAGE> 8
SUMMARY
The following is a summary of certain information contained elsewhere in
this Proxy Statement/Prospectus. The summary is not intended to be a complete
description of the matters covered in this Proxy Statement/Prospectus and is
subject to and qualified by reference to the more detailed information contained
elsewhere herein, including in the Annexes hereto. Holders of shares of WVB
Common Stock are urged to read carefully the entire Proxy Statement/Prospectus,
including the Annexes.
On July 28, 1995, NEXTEL Communications, Inc., a corporation organized
under the laws of the State of Delaware in 1987 ("Old Nextel"), was merged with
ESMR, Inc. ("ESMR"), until then a wholly owned subsidiary of Motorola, Inc.
("Motorola"). ESMR was the surviving corporation in the merger (the "Motorola
Transaction") and succeeded to Old Nextel's assets and liabilities. ESMR changed
its name to Nextel Communications, Inc., effective upon consummation of the
Motorola Transaction. References herein to Nextel or the Company for periods
prior to July 28, 1995 refer to Old Nextel as the predecessor to the business
and operations of Nextel. Unless the context requires otherwise, references to
the Company or to Nextel are intended to include Nextel Communications, Inc. and
its consolidated subsidiaries.
Information contained herein gives effect to the acquisition of
approximately 1,220,000 shares of Nextel Common Stock by Digital Radio L.L.C.
(the "McCaw Investor") on April 5, 1995, an additional acquisition of 8,163,265
shares of Class A Convertible Redeemable Preferred Stock of Nextel and 82 shares
of Class B Convertible Preferred Stock of Nextel by the McCaw Investor and the
consummation of related transactions on July 28, 1995 (the "McCaw Transaction"),
the merger of OneComm Corporation ("OneComm") with and into Nextel on July 28,
1995 (the "OneComm Transaction"), the consummation of the Motorola Transaction
on July 28, 1995, the merger of a subsidiary of Nextel with American Mobile
Systems Incorporated ("AMS") on July 31, 1995 (the "AMS Transaction"), the
merger of Dial Page, Inc. ("Dial Page") with and into Nextel on January 30, 1996
(the "Dial Page Transaction"), and the purchase of 8,155,506 shares of Nextel
Common Stock by Comcast FCI, Inc. ("Comcast FCI"), a wholly owned subsidiary of
Comcast Corporation ("Comcast") on February 9, 1996, pursuant to the exercise of
certain anti-dilutive purchase rights (the "Comcast Purchase Right") of Comcast
and Comcast FCI in connection with the Dial Page Transaction.
Unless the context requires otherwise, references to WVB are intended to
include WVB and its consolidated subsidiaries.
A. RECAPITALIZATION OF WVB
The WVB Board recommends that WVB Shareholders approve an amendment to
WVB's Articles of Incorporation (the "WVB Charter") that will recapitalize WVB
by converting each outstanding share of WVB Common Stock into 81 shares of WVB
Class A Common Stock and 19 shares of WVB Class B Common Stock (the
"Recapitalization"). The Recapitalization is being proposed in contemplation of
the
Merger and the effect will be to split WVB's equity into two classes, one of
which is intended to be acquired by Nextel upon consummation of the Merger and
the other of which will be retained by the WVB Shareholders. The form of the
proposed amendment to the WVB Charter is attached to this Proxy
Statement/Prospectus as Annex B.
The proposed amendment provides that, except as required by law and except
with respect to the election of directors, the shares of WVB Class A Common
Stock and WVB Class B Common Stock will vote together as a single class, with
each share of WVB Class A Common Stock having 90/81 votes and each share of WVB
Class B Common Stock having 10/19 votes. Thus, as a class, the WVB Class A
Common Stock will have 90% of the voting power of WVB and the WVB Class B Common
Stock will have 10% of such voting power. The proposed amendment further
provides that the holders of WVB Class A Common Stock will be entitled to elect
nine directors and the holders of WVB Class B Common Stock will be entitled to
elect one director.
6
<PAGE> 9
B. THE PARTIES TO THE MERGER
NEXTEL
Nextel's business consists principally of providing wireless communications
services to its customers utilizing specialized mobile radio ("SMR") frequencies
licensed to its subsidiaries by the Federal Communications Commission ("FCC").
Nextel is the leading provider of SMR wireless communications services in nearly
all 48 states in the continental United States, including all of the top 50
metropolitan market areas in the United States. As of September 30, 1996, Nextel
provided service to approximately 816,000 analog SMR units and approximately
228,000 units utilizing Nextel's Digital Mobile networks (as defined below).
Nextel's operating revenues primarily arise from two-way radio dispatch and
mobile telephone service and, to a lesser extent, from sales and maintenance of
related equipment. Nextel's business plans and efforts are to a large extent
directed toward replacing the traditional analog SMR systems that it currently
operates with advanced mobile communications systems employing digital
technology with a multi-site configuration permitting frequency reuse ("Digital
Mobile networks"). The Company is implementing its Digital Mobile networks
utilizing digital technology developed by Motorola (such technology is referred
to as the "Integrated Digital Enhanced Network" or "iDEN" and was known
previously as "Motorola Integrated Radio System" or "MIRS"). As of September 30,
1996, Nextel's Digital Mobile networks were operating throughout most of
California, the greater metropolitan areas of Baltimore, Boston, Charlotte,
North Carolina, Chicago, Colorado Springs, Denver, Detroit, Greensboro, North
Carolina, Hartford, Kansas City, Las Vegas, Milwaukee, New York, Newark,
Oklahoma City, Philadelphia, Portland, Oregon, Raleigh/Durham, Seattle, St.
Louis, Toledo, Topeka, Tulsa, Washington D.C., Wichita and Winston-Salem, North
Carolina, south along the I-85 corridor through Greenville/Spartanburg, South
Carolina and including Atlanta, Georgia and west along the I-20 corridor to and
including Birmingham, Alabama.
Prior to the second quarter of 1996, the Company implemented its Digital
Mobile networks in its market areas using Motorola's "first generation" iDEN
technology. During that time frame, the Company encountered certain technology
and system performance issues relating primarily to the voice transmission
quality of the mobile telephone service. In response to these issues, the
Company and Motorola have undertaken, and continue to undertake, system
enhancement efforts to address various circumstances believed to adversely
affect system performance and customer satisfaction, particularly those
associated with voice transmission quality. Additionally, independent of such
system enhancement efforts, the Company, together with Motorola, is pursuing a
significant program directed toward the development and deployment of
modifications to the "first generation" iDEN technology platform, to be known as
Reconfigured iDEN, designed principally to produce improvements in voice
transmission quality. Based on its experiences with the Reconfigured iDEN
technology, including the feedback received in customer trials and various other
inputs and considerations, the Company announced the first full-scale commercial
launch of the Reconfigured iDEN Digital Mobile network in the Chicago market
late in the third quarter of 1996 and subsequently announced full-scale
commercial launches in the Atlanta, Boston, Denver, Detroit and Las Vegas
markets, in each case accompanied by a more broadly-focused marketing campaign
in such market areas.
Nextel's principal executive and administrative facility is located at 1505
Farm Credit Drive, McLean, Virginia 22102, and its telephone number at that
location is (703) 394-3000.
WVB
As of September 30, 1996, WVB, through its subsidiaries, held or had the
right to use licenses for a total of approximately 1,700 channels in 27
metropolitan areas within Brazil. WVB's most important channel block is in Sao
Paulo, the world's second largest metropolitan area, where subsidiaries of WVB
hold collectively 195 of the 420 SMR channels allocated as of the date hereof.
In addition, WVB provides analog SMR services in the 800 MHz frequency band in
15 of these metropolitan areas. As of September 30, 1996, WVB's subsidiaries had
approximately 15,000 subscribers. See "Information About WVB."
WVB's principal executive offices are located at 2300 Clarendon Blvd.,
Suite 800, Arlington, Virginia 22201, and its telephone number at that location
is (703) 528-8787.
7
<PAGE> 10
C. THE MERGER
EFFECTIVE TIME OF THE MERGER
The Closing of the Merger (the "Closing Date") will occur as soon as
practicable after all of the conditions to the consummation of the Merger have
been fulfilled or, to the extent permissible, waived. On the Closing Date, WVB
and DCI shall cause a certificate of merger and articles of merger relating to
the Merger to be filed with the Secretary of State of the State of Delaware and
the Virginia State Corporate Commission. The Merger will occur at the time and
on the date specified in the certificate of merger and the articles of merger
(such time being referred to as the "Effective Time"). WVB and Nextel anticipate
that the Effective Time will occur promptly after the Special Meeting. See "The
Merger -- Terms of the Merger -- Conditions to the Merger."
TERMS OF THE MERGER
At the Effective Time, DCI will be merged with and into WVB with WVB being
the surviving corporation in the Merger (sometimes referred to herein as the
"Surviving Corporation"). DCI shall cease to exist, and WVB shall become a
majority-owned subsidiary of Nextel, governed by the laws of the Commonwealth of
Virginia, with all of the rights and obligations of each of DCI and WVB.
At the Effective Time, all shares of WVB Class A Common Stock issued and
outstanding immediately prior to the Effective Time, other than shares held in
the treasury of WVB (which will be canceled) and shares as to which statutory
dissenters' rights have been exercised, and (except as described below) all WVB
Options shall be converted in the aggregate into the right to receive from the
Surviving Corporation a number of shares of Nextel Common Stock equal to (i) (x)
$186,300,000 (the purchase price being paid by Nextel) minus (y) the sum of
principal and interest due to Telcom Ventures, LLC ("Telcom") as of the
Effective Time under the WVB Note, divided by (ii) $15.5719, the average of the
closing prices of the Nextel Common Stock on the NSM for the 20 trading days
commencing on October 29, 1996 and ending on November 25, 1996 (the "Closing
Average"). Such shares of Nextel Common Stock will be distributed to holders of
WVB Class A Common Stock and (except as described below) to the holders of the
WVB Options (the "WVB Optionholders") on a pro rata basis based on (a) the
number of shares of WVB Class A Common Stock held by each holder of WVB Class A
Common Stock and (b) the number and value of the shares of WVB Common Stock that
the WVB Optionholders would be entitled to receive if they had exercised their
options in full in a cashless manner immediately prior to the Closing.
Additionally at the Effective Time, the WVB Note will be exchanged for a number
of shares of Nextel Common Stock having a value equal to (i) the sum of
principal and interest due to Telcom under the WVB Note as of the Effective
Time, divided by (ii) the Closing Average. Immediately following the Effective
Time the WVB Note will be canceled.
In the Merger, shares of DCI will be converted into a number of shares of
Class A Common Stock of the Surviving Corporation (the "New Class A Common
Stock") which will represent 81% of the Surviving Corporation's outstanding
shares immediately following the Merger and will control 90% of the voting power
of the Surviving Corporation. Shares of WVB Class B Common Stock will be
converted in the Merger into an identical number and class of shares of the
Surviving Corporation (the "New Class B Common Stock"), which will remain
outstanding following the Merger. Following the completion of the Merger, the
New Class B Common Stock will represent 19% of the Surviving Corporation's
outstanding shares and control 10% of the voting power of the Surviving
Corporation. Except as described below, shares of WVB Class A Common Stock and
WVB Options outstanding immediately prior to the Merger will be converted into
the right to receive Nextel Common Stock as described above.
Pursuant to the Merger Agreement, WVB has agreed, among other things, to
use its best efforts to obtain waivers from the WVB Optionholders of their
rights to receive anything other than the shares of Nextel Common Stock
specified in the Merger Agreement in respect of the WVB Options (the
"Optionholder Agreements"). To the extent that any WVB Optionholder does not
elect to enter into an Optionholder Agreement, such holder will be entitled to
receive, upon exercise of his or her WVB Option, the number of shares of Nextel
Common Stock issuable in respect of the shares of WVB Class A Common Stock
issuable
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<PAGE> 11
pursuant to his option and the number of shares of New Class B Common Stock
issuable in respect of the shares of WVB Class B Common Stock issuable pursuant
to his option. Additionally, WVB may enter into agreements with WVB
Optionholders providing for cancellation of such options in which event the WVB
Optionholder would not be entitled to participate in the Merger.
No fractional shares of Nextel Common Stock will be issued in the Merger.
In lieu of any such fractional shares, each holder of WVB Class A Common Stock
and any WVB Optionholder who otherwise would be entitled to receive a fractional
share of Nextel Common Stock will be paid an amount in cash, without interest,
determined as described under "The Merger -- Terms of the Merger
Agreement -- Fractional Shares."
SPECIAL MEETING; VOTE REQUIRED
This Proxy Statement/Prospectus is being furnished to the WVB Shareholders
in connection with the Special Meeting. The Special Meeting will be held at
10:00 a.m., local time, on January 24, 1997, at 2300 Clarendon Blvd., Suite 800,
Arlington, Virginia 22201. The WVB Board has fixed the close of business on
November 13, 1996 as the record date for the determination of holders of WVB
Common Stock entitled to receive notice of and to vote at the Special Meeting
(the "Record Date"). On the Record Date, there were 90,341 shares of WVB Common
Stock outstanding and entitled to vote at the Special Meeting. Approval of each
of the Recapitalization and the Merger Agreement requires the affirmative vote
of the holders of more than two-thirds of the outstanding shares WVB Common
Stock.
As of the Record Date, the directors and officers of WVB and their
affiliates beneficially owned an aggregate of 90,300 shares of WVB Common Stock
or approximately 99.95% of the shares of WVB Common Stock outstanding on that
date. See the "Special Meeting -- Beneficial Ownership of WVB Common Stock."
Each of Telcom, South Beach Ventures Inc., Rajendra Singh, Neera Singh, The
Hirsh Raj Singh Education Trust and the Samir Raj Singh Education Trust
(together the "Principal Shareholders") has entered into an agreement (the
"Voting Agreement"), pursuant to which, among other things, each such
shareholder has agreed to vote all shares of WVB Common Stock over which he, she
or it exercises voting authority in favor of the Merger Agreement. As of the
Record Date, the Principal Shareholders collectively owned beneficially 90,300
shares of WVB Common Stock or approximately 99.95% of the outstanding shares and
the voting power of the WVB Common Stock. See "The Special Meeting -- Beneficial
Ownership of WVB Common Stock." Approval of the Merger Agreement by the WVB
Shareholders is therefore assured.
BACKGROUND; REASONS FOR THE MERGER; RECOMMENDATION OF THE WVB BOARD
See "THE MERGER -- Background of the Merger" for a description of the
background of the Merger.
The WVB Board has unanimously approved the Merger Agreement and determined
to recommend the Merger to the WVB Shareholders. For a discussion of the reasons
the WVB Board has recommended the Merger and more information regarding the WVB
Board's recommendation, see "THE MERGER -- Recommendation of the WVB Board;
Reasons for the Merger."
Certain members of WVB's management and Board of Directors may have certain
interests in the Merger that are in addition to their interests as shareholders
of WVB. See "THE MERGER -- Interests of Certain Persons in the Merger."
WVB'S BOARD BELIEVES THAT THE MERGER IS IN THE BEST INTERESTS OF WVB AND
THE WVB SHAREHOLDERS AND RECOMMENDS THAT WVB SHAREHOLDERS VOTE FOR APPROVAL AND
ADOPTION OF THE MERGER AGREEMENT AND THE MERGER.
EXCHANGE OF STOCK CERTIFICATES
On the Closing Date (or as soon as practicable thereafter), each holder of
a certificate for WVB Common Stock which, as a result of the Recapitalization
will be deemed to represent the number of shares of WVB Class A Common Stock and
WVB Class B Common Stock into which such holder's shares of WVB Common Stock
have been converted as a result of the Recapitalization (other than certificates
representing
9
<PAGE> 12
shares held by WVB or shares with respect to which statutory dissenters' rights
have been exercised) (a "WVB Certificate") should deliver such WVB Certificate
to the Surviving Corporation. Upon surrender to the Surviving Corporation of a
WVB Certificate, together with all other required documents, if any, the former
holder of the shares of WVB Common Stock represented by such WVB Certificate
shall receive (i) a certificate or certificates representing the number of
shares of New Class B Common Stock into which such holder's shares of WVB Class
B Common Stock were converted, and (ii) a certificate representing the number of
shares of Nextel Common Stock to which such holder shall have become entitled
pursuant to the Merger, determined as described above. Each WVB Optionholder who
has entered into an Optionholder Agreement, upon delivery of the original
documentation representing such holder's WVB Option together with all required
documents to the Surviving Corporation, shall receive a certificate representing
the number of shares of Nextel Common Stock to which such holder shall have
become entitled pursuant to the Recapitalization and the Merger, determined as
described above. In the event a WVB Optionholder does not enter into an
Optionholder Agreement, unless his WVB Option has been cancelled as described
above, such holder upon delivery of the required documents will be entitled to
the shares of Nextel Common Stock and New Class B Common Stock issuable in
respect thereof. Telcom, the holder of the WVB Note, upon surrender thereof,
shall be entitled to receive a certificate representing the number of shares of
Nextel Common Stock to which such holder shall have become entitled pursuant to
the Merger. See "The Merger -- Terms of the Merger."
LIMITATIONS ON TRANSFERABILITY OF SHARES
Persons deemed "affiliates" of WVB for purposes of the Securities Act may
sell shares of Nextel Common Stock received in the Merger only in accordance
with Rule 145 of the Securities Act. In addition, the transferability of shares
of New Class B Common Stock issuable in connection with the Merger will be
limited by the terms of a shareholders agreement among the shareholders of the
Surviving Corporation and the Surviving Corporation. See "The
Merger -- Limitations on Transferability of Nextel Common Stock and New Class B
Common Stock."
CONDITIONS TO THE MERGER; TERMINATION
The respective obligations of Nextel, DCI and WVB to consummate the Merger
are subject to the satisfaction of certain conditions, including approval of the
Recapitalization and the Merger Agreement by the WVB Shareholders (see "The
Special Meeting -- Record Date; Vote Required") and other conditions specified
in the Merger Agreement. See "The Merger -- Conditions to the Merger."
The Merger Agreement may be terminated by mutual consent of Nextel, WVB and
DCI at any time prior to the Effective Time. The Merger Agreement may be
terminated by action of the board of directors of WVB or Nextel under certain
conditions, including, but not limited to (i) if the Merger is not consummated
by January 29, 1997, provided that the right to terminate shall not be available
to any party whose failure to perform caused such delay, (ii) if consummation of
the Merger is prohibited by final action of a court or other governmental
entity, or (iii) if the other party has failed to comply in a material respect
with its covenants or agreements contained in the Merger Agreement. See "The
Merger -- Amendment, Waiver and Termination."
INDEMNIFICATION
Pursuant to the Voting Agreement, each of the Principal Shareholders has
agreed to indemnify the Surviving Corporation in certain events in an amount up
to the value determined by multiplying the number of shares of Nextel Common
Stock received by such Principal Shareholder at Closing by the Closing Average.
See "The Merger -- Terms if the Merger -- Indemnification."
DISSENTERS' RIGHTS
WVB Shareholders who neither vote for nor consent in writing to the Merger
will have the right to receive the "fair value" of their WVB Common Stock in
cash, if such shareholders comply with the provisions
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<PAGE> 13
of the applicable provisions under Article 15 of the Virginia Stock Corporation
Act (the "VSCA"). See "The Merger -- Dissenters' Rights."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
Nextel, DCI, and WVB intend that the Recapitalization and the Merger each
will qualify as a reorganization described in section 368(a) of the Internal
Revenue Code of 1986, as amended (the "Code"). Accordingly, the WVB Shareholders
should recognize no gain or loss on the exchange of their WVB Common Stock for
WVB Class A Common Stock and WVB Class B Common Stock pursuant to the
Recapitalization, and those shareholders should recognize no gain or loss on the
exchange of their WVB Class A Common Stock for Nextel Common Stock pursuant to
the Merger. In addition, WVB should recognize no gain or loss as the result of
the Recapitalization, and none of Nextel, DCI, or WVB should recognize gain or
loss as the result of the Merger. See "The Merger -- Certain Federal Income Tax
Consequences" for a more detailed description of the Federal income tax
consequences to the WVB shareholders of the Recapitalization and the Merger.
NO PRIVATE LETTER RULING HAS BEEN OR WILL BE SOUGHT REGARDING THE FEDERAL
INCOME TAX TREATMENT OF THE MERGER AS CONCERNS ANY OF NEXTEL, WVB, DCI OR THE
WVB SHAREHOLDERS, AND, EXCEPT AS SET FORTH IN THE MERGER AGREEMENT, NONE OF
NEXTEL, WVB OR DCI SHALL HAVE ANY LIABILITY TO ANY OF THE WVB SHAREHOLDERS IF
THE INTENDED FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER ARE NOT ACHIEVED OR
IF PARALLEL TAX TREATMENT IS NOT EXTENDED UNDER STATE, LOCAL OR OTHER APPLICABLE
TAX LAWS. HOLDERS OF WVB COMMON STOCK SHOULD CONSULT WITH THEIR OWN TAX ADVISORS
REGARDING THE TAX CONSEQUENCES OF THE MERGER IN LIGHT OF THEIR PERSONAL TAX
SITUATIONS.
ACCOUNTING TREATMENT
The Merger will be accounted for as a purchase under generally accepted
accounting principles.
REGULATORY APPROVALS
The Merger is subject to the notification requirements of the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), and the consummation of the Merger is subject to the expiration or early
termination of the waiting period under the HSR Act. Nextel and WVB filed the
required information and material with respect to the Merger under the HSR Act
on November 15, 1996 and on November 26, 1996, each was notified of the early
termination of the waiting period under the HSR Act. See "THE
MERGER -- Regulatory Approvals."
CERTAIN DIFFERENCES IN RIGHTS OF SHAREHOLDERS
At the Effective Time, holders of WVB Class A Common Stock will become
shareholders of Nextel, a Delaware corporation. The rights of shareholders under
Delaware law differ in certain respects from the rights of shareholders under
Virginia law. Additionally, there are differences between the rights of holders
of shares of capital stock of each of the two companies pursuant to their
respective certificates of incorporation and by-laws. The rights of holders of
WVB Common Stock, therefore, will change as a result of the Merger. See "The
Merger -- Certain Differences in Rights of Shareholders."
ADDITIONAL AGREEMENTS
The Merger Agreement provides that, as conditions to the consummation of
the Merger, certain agreements must be entered into, including but not limited
to (i) a noncompetition agreement between Nextel and certain affiliates of WVB
pursuant to which such affiliates will agree not to compete with Nextel and the
Surviving Corporation in the paging and SMR business in Brazil and (ii) a
shareholders agreement (the "Shareholders Agreement") pursuant to which certain
rights of the WVB Shareholders, as holders of the New Class B Common Stock, will
be set forth. See "The Merger -- Terms of Merger -- Additional Agreements --
Shareholders Agreement."
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<PAGE> 14
Pursuant to the Merger Agreement and the Voting Agreement, the Principal
Shareholders will be obligated to indemnify Nextel and its affiliates under
certain circumstances. See "The Merger -- Terms of the
Merger -- Indemnification."
CERTAIN COVENANTS
The Merger Agreement contains covenants of WVB relating to the operations
of WVB prior to the Effective Time and other customary covenants of the parties.
In addition, pursuant to the Merger Agreement, subject to certain conditions,
Nextel has agreed to provide reasonable assistance to the WVB Shareholders in
connection with the preparation of a resale prospectus (and related registration
statement) in connection with the proposed public offering of securities of a
trust that in certain circumstances may be redeemable in exchange for certain of
the shares of Nextel Common Stock issuable in the Merger.
D. MARKET INFORMATION
Nextel Common Stock is quoted on the NSM under the symbol "CALL." On
October 28, 1996, the last trading day preceding public announcement of the
Merger, the closing price per share of Nextel Common Stock on the NSM was
$16.50, and on December 19, 1996, such price was $13.375. WVB Shareholders are
advised to obtain current market quotations for Nextel Common Stock.
There is no public trading market for the WVB Common Stock. WVB has never
paid cash dividends on the WVB Common Stock. See "Information About WVB."
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<PAGE> 15
E. COMPARATIVE UNAUDITED HISTORICAL AND
PRO FORMA PER SHARE INFORMATION
The following information reflects certain comparative unaudited historical
and pro forma per share information for Nextel and WVB based on (i) the
unaudited quarterly financial statements of Nextel and WVB as of and for the
nine months ended September 30, 1996 and the audited financial statements of
Nextel and WVB as of and for the year ended December 31, 1995 and (ii) the
unaudited pro forma financial information for Nextel (giving effect to the
Merger), all of which is incorporated by reference or included elsewhere herein.
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, 1995 SEPTEMBER 30, 1996
--------------------------- ---------------------------
PRO FORMA PRO FORMA
HISTORICAL CONSOLIDATED HISTORICAL CONSOLIDATED
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Nextel:
Book value per share...................... $13.12 $13.24 $12.96 $13.08
Dividends per share....................... -- -- -- --
Net loss per share........................ $ 2.31 $ 2.21 $ 1.80 $ 1.76
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, 1995 SEPTEMBER 30, 1996
-------------------------------- --------------------------------
EQUIVALENT EQUIVALENT
PRO FORMA PRO FORMA
HISTORICAL(a) CONSOLIDATED(b) HISTORICAL(a) CONSOLIDATED(b)
------------- --------------- ------------- ---------------
<S> <C> <C> <C> <C>
WVB:
Book value per share................ $320.01 $ 20.01 $217.21 $ 19.32
Dividends per share................. -- -- -- --
Net loss per share.................. $ 55.70 $ 3.34 $103.82 $ 2.60
</TABLE>
- ---------------
(a) The historical per share amounts for WVB represent the per share amounts for
WVB prior to the Recapitalization. After the Recapitalization, the
historical book value per share and the net loss per share amount for the
year ended December 31, 1995 would be $3.20 and $0.56, respectively. The
historical book value per share and the net loss per share for the nine
months ended September 30, 1996 would be $2.17 and $1.04, respectively.
(b) The equivalent pro forma amounts represent the combined pro forma per share
amounts multiplied by an assumed exchange ratio for shares of WVB Class A
Common Stock to Nextel Common Stock based upon the number of shares WVB
Common Stock and the number of WVB Options outstanding and the amount due
under the WVB Note as of the respective dates and the Closing Average, so
that the equivalent pro forma per share amounts are equated to the
respective value of one share of WVB Class A Common Stock.
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<PAGE> 16
RISK FACTORS
THE FOLLOWING RISK FACTORS MAY AFFECT THE VALUE OF SHARES OF NEXTEL COMMON
STOCK AND THEREFORE SHOULD BE CONSIDERED BY HOLDERS OF WVB COMMON STOCK, IN
CONJUNCTION WITH THE OTHER INFORMATION INCLUDED AND INCORPORATED BY REFERENCE IN
THIS PROXY STATEMENT/PROSPECTUS, IN DECIDING WHETHER TO APPROVE THE MERGER. SEE
ALSO "-- FORWARD LOOKING STATEMENTS."
HISTORY OF AND FUTURE EXPECTATIONS OF LOSSES AND NEGATIVE CASH FLOW
The activities of Nextel since its inception in 1987 have been concentrated
on the acquisition and operation of SMR businesses and the development of
Digital Mobile networks. Nextel has incurred net losses since its inception,
including net losses of $125,849,000 for the nine months ended December 31,
1994, and $331,165,000 for the year ended December 31, 1995. Nextel had an
accumulated deficit totaling $579,231,000 at December 31, 1995. On a pro forma
basis for the year ended December 31, 1995, taking into account certain
transactions that were consummated during and after that period but before the
date hereof (including the consummation of the Dial Page Transaction), Nextel
would have generated a net loss of $526,699,000.
System infrastructure purchases under purchase agreements with Motorola and
other vendors of equipment related to the Digital Mobile networks, and inventory
purchases made in anticipation of the commencement of commercial service in
Nextel's markets, have caused and will continue to cause a significant increase
in assets and liabilities during the start-up phase of the Digital Mobile
networks. Such Digital Mobile network costs are charged to operations as
depreciation expense beginning in the quarter during which such market commences
commercial operations.
Nextel anticipates that its net losses will increase significantly during
the ongoing start-up phase of Digital Mobile networks and that it will continue
to generate operating losses over the next several years. Nextel's ability to
arrange sufficient equity and/or debt financing or to generate sufficient
revenue to cover its operating and capital needs is subject to a number of risks
and contingencies. Accordingly, there can be no assurance as to whether or when
Nextel's operations will become profitable. See "-- Nextel to Require Financing"
and "-- Forward Looking Statements."
The development, implementation and operation of the Digital Mobile
networks will require significant funds. Due to expected operating losses and
capital requirements, Nextel expects that it will be required to raise a portion
of such funds externally. See "-- Nextel to Require Financing" and "-- Forward
Looking Statements."
RISKS OF IMPLEMENTATION OF DIGITAL MOBILE NETWORKS
Nextel and its subsidiaries are licensed to provide wireless communications
services in nearly all 48 states in the continental United States, including all
of the top 50 metropolitan market areas in the United States. Nextel has
activated its Digital Mobile networks in certain of these market areas. As of
September 30, 1996, Nextel's Digital Mobile networks were operating throughout
most of California, in the greater metropolitan areas of Baltimore, Boston,
Charlotte, North Carolina, Chicago, Colorado Springs, Denver, Detroit,
Greensboro, North Carolina, Hartford, Kansas City, Las Vegas, Milwaukee, New
York, Newark, Oklahoma City, Philadelphia, Portland, Oregon, Raleigh/Durham,
Seattle, St. Louis, Toledo, Topeka, Tulsa, Washington D.C., Wichita and
Winston-Salem, North Carolina, south along the I-85 corridor through
Greenville/Spartanburg, South Carolina to and including Atlanta, Georgia and
west along the I-20 corridor to and including Birmingham, Alabama. As of
September 30, 1996, Nextel's Digital Mobile networks were activated in major
metropolitan market areas throughout the United States that collectively
accounted for more than half of the total United States population, and
approximately 228,000 subscriber units were operating on Nextel's Digital Mobile
networks. Under its nationwide Digital Mobile network build-out plan (which, as
discussed below in "-- Nextel to Require Financing," "-- Implementation of
Digital Mobile Networks Subject to Risks of Developing Technology" and
"-- Success of Nextel Is Dependent on its Ability to Compete," is premised on
several key assumptions, including availability of sufficient funding,
achievement of satisfactory system performance standards and maintenance of
targeted service and subscriber equipment pricing levels), Nextel currently
expects its Digital Mobile networks to be available in areas covering
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<PAGE> 17
approximately 85% of the United States population by the end of 1998. See
"-- Forward Looking Statements."
In order to activate Digital Mobile network service in a market, the
Company must free a certain number of 800 MHz frequencies from SMR analog
traffic in that market ("channel recovery"). Channel recovery involves
transferring 800 MHz customers to 900 MHz systems or other 800 MHz analog SMR
systems. Upon commencement of commercial service, the Company intends to sell
the Digital Mobile network services to existing customers and to add 800 MHz
frequencies to the Digital Mobile networks as such customers migrate
("migration"). The Company has commenced its channel recovery and migration
efforts for existing customers in each of the markets in which its Digital
Mobile networks have been activated. The Company expects that only a portion of
its SMR channels in each market will be needed for the initial phase of the
Digital Mobile network build-out. Accordingly, the Company expects to have the
opportunity to move its customers onto the Digital Mobile network gradually to
avoid any significant disruption of service, although there can be no assurance
that such disruption will not occur.
The implementation of Digital Mobile networks involves systems design, site
procurement, construction, electronics installation, receipt of necessary FCC
and other regulatory approvals, channel recovery and initial systems
optimization prior to commencing commercial service. Each stage can take from
several weeks to several months and involves various risks and contingencies,
the outcome of which cannot be predicted. There can be no assurance that Nextel
will be able to implement Digital Mobile networks in any particular market, in
accordance with its current plans and schedules. See "-- Forward Looking
Statements."
IMPLEMENTATION OF DIGITAL MOBILE NETWORKS SUBJECT TO RISKS OF DEVELOPING
TECHNOLOGY
Currently, there are two principal digital technology formats that are
being assessed or proposed for deployment by providers of cellular telephone
service or by certain entities that have been awarded personal communications
services ("PCS") licenses to provide wireless communications services in the
United States. One such format is known as the Time Division Multiple Access
("TDMA") digital transmission technology, a version of which, known as
"three-time slot TDMA" has been deployed by AT&T Wireless Services (formerly
McCaw Cellular Communications, Inc.), a subsidiary of AT&T, and by Southwestern
Bell Mobile Systems in certain of their cellular system markets, and is expected
to be deployed by certain other cellular operators pursuant to a standard
adopted by the cellular industry. The other principal format is known as the
Code Division Multiple Access ("CDMA") digital transmission technology. Although
TDMA and CDMA are both digital transmission technologies, and thus share certain
basic characteristics and areas of contrast to analog transmission technology,
TDMA and CDMA are not compatible or interchangeable with each other.
The Motorola proprietary first generation iDEN technology originally
incorporated in Nextel's Digital Mobile networks is known as "six-time slot
TDMA." Although based on the TDMA technology format, this first generation iDEN
technology differs in a number of significant respects from the TDMA technology
versions being assessed or deployed by cellular operators and PCS licensees in
the United States, which differences may have important consequences.
Additionally, unlike the three-time slot TDMA technology format being utilized
for the mobile telephone function in the newly developed Reconfigured iDEN
technology platform or the three-time slot TDMA technology format being utilized
by certain cellular providers, the first generation iDEN technology currently
being utilized by Nextel in most of its presently operating Digital Mobile
networks, as well as for the dispatch function in the newly-developed
Reconfigured iDEN technology platform, can carry up to six voice and/or control
paths per channel. The use of six-time slot TDMA technology in combination with
Nextel's re-use of its licensed frequencies in a cellular-type system design
permits Nextel to utilize its current holdings of spectrum more efficiently.
Efficient utilization of spectrum is an important objective generally because
less spectrum is available in the SMR band than is or may be licensed to each
cellular and certain PCS operators in each market. Reconfigured iDEN, which is
designed to use three time slots per channel for the mobile telephone service,
will result in a reduction in channel capacity compared to the capacity
achievable using first generation iDEN technology for mobile telephone service.
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<PAGE> 18
Although Nextel believes that TDMA technology, on balance, is superior to
analog technology that is used in traditional SMR systems, the use of digital
technology in general, and the six-time slot TDMA version of first generation
iDEN in particular, as each is currently deployed, involves certain performance
trade-offs, for example, in various characteristics affecting voice quality and
fidelity. In general, as the relevant technologies are currently deployed,
digital voice transmission produces a distinguishably different set of sound
characteristics than analog voice transmission (whether SMR or cellular). The
difference results, in part, from the fact that digital voice transmission
requires the digital encoding and decoding of the voice communication. Hence,
the six-time slot TDMA version of first generation iDEN, the three-time slot
version of Reconfigured iDEN and other digital cellular voice transmissions, as
currently deployed, each sound different from traditional analog cellular voice
transmissions. These trade-offs may have an effect on customer acceptance of
iDEN technology.
It is possible that in the future a digital transmission technology other
than TDMA may gain acceptance sufficient to adversely affect the resources
devoted by third parties to developing or improving TDMA-based technology. In
addition, existing digital cellular technology formats including cellular TDMA
cannot currently be utilized on Nextel's present SMR spectrum holdings.
Accordingly, if any improvements were to be made to such currently existing
digital cellular technology formats, the prospect of achievement of parallel
improvements in the TDMA-based iDEN technology presently utilized by Nextel is
not certain. Any difference that may from time to time exist between the
technology deployed in Nextel's Digital Mobile networks and competitive
technologies then deployed by other wireless communications service providers,
such as analog, CDMA, TDMA or other transmission technology formats that may be
developed in the future, may affect customer acceptance of the services offered
by Nextel. See "-- Forward Looking Statements."
Customer acceptance of the services offered by Nextel will be affected not
only by technology-based differences, but also by the operational performance
and reliability of system transmissions on Nextel's Digital Mobile networks. As
is frequently the case both in the development and implementation of new
technologies and the offering of related services, Nextel has experienced
difficulties and delays in the implementation of the first generation iDEN TDMA
technology in its Digital Mobile networks, resulting from certain technology and
performance issues with respect to system reliability (the percentage of time
the system is operating), system access (how often a user can gain access to the
system) and various characteristics affecting voice quality that have limited
its ability to market mobile telephone services utilizing the Company's Digital
Mobile networks. Nextel's objectives in carrying out the initial phase of system
development and technology optimization activities have been to achieve
satisfactory performance levels in the areas of system reliability and system
access. Ongoing optimization, software loading and planned maintenance
activities affecting the Digital Mobile network systems periodically require the
scheduled turn-down of selected subsystems during periods of very low system
traffic, typically at night or on weekend days. See "-- Forward Looking
Statements."
During calendar years 1994 and 1995, Nextel and Motorola coordinated their
efforts to identify and implement various system hardware adjustments and
software upgrades to bring about improvements in various Digital Mobile network
operating and performance characteristics. Although further improvements in the
areas of system reliability and access are expected to be pursued, Nextel
believes that its existing Digital Mobile networks, as operated at September 30,
1996, were demonstrating acceptable performance levels in these areas. Motorola
has advised Nextel that (independent of development commitments contained in the
second amendment to the existing equipment purchase agreement between Nextel and
Motorola (the "Second Equipment Agreement Amendment")) Motorola contemplates
continuing to install software upgrades during 1996 in accordance with its
previous plans. Nextel expects that such software upgrades will be directed at
producing system access and reliability improvements, as well as voice
transmission quality improvements in the mobile telephone mode in the Digital
Mobile networks. Nextel further anticipates that there will be an on-going focus
on system optimization activities directed at achieving improvements in the
overall performance of the Digital Mobile networks.
Throughout late 1994 and continuing during 1995, Nextel and Motorola
conducted intensive objective system testing as well as customer surveys
designed to assess the foregoing operational issues. As discussed above, during
1994 and 1995, a number of system hardware adjustments and software upgrades
were made to
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address issues identified through such testing and surveys. Nextel is continuing
such system testing and customer surveys in 1996, and anticipates that it will
continue to advise and consult with Motorola concerning potential measures that
could be taken to address particularly-identified system performance or customer
satisfaction issues revealed in such testing and surveys. Nextel believes that
customer acceptance of the dispatch service on the Digital Mobile networks was
generally at an acceptable overall level during the period since late 1994.
Nextel also believes that the successful development and deployment of the
Reconfigured iDEN technology platform, with its accompanying improvements in the
quality of the mobile telephone service provided on Nextel's Digital Mobile
networks, should enable Nextel to be in a position to market such services
aggressively as part of a competitive wireless communications services
alternative to existing cellular telephone service in the markets where
Reconfigured iDEN is deployed.
Nextel, for a limited period after first making its Digital Mobile network
services available on a commercial basis, provided, and in certain markets has
continued to provide, discounts to customers, principally with regard to such
customers' usage of mobile telephone services, because of concerns with the
first generation iDEN system performance and network service-related issues, and
gave, and in certain markets continues to give, credits to subscribers in an
attempt to foster satisfactory customer relations in response to certain
performance and network service-related issues. Such extended system development
and technology optimization activities, customer loading delays and customer
discounts and credits have adversely affected and may continue to adversely
affect Nextel's ability to generate revenue. To date, Nextel's experience is
based on a limited number of customers who are primarily oriented to dispatch
service, and such experience should not necessarily be regarded as an accurate
predictor of Nextel's experience in the future, particularly as Nextel's
customer base expands beyond such group of initial customers. Any inability to
address satisfactorily and resolve performance issues that affect customer
acceptance of Digital Mobile network service could delay or adversely affect the
successful commercialization of the Digital Mobile networks and could adversely
affect the business and financial prospects of Nextel. If Nextel for any reason
is unable to implement Digital Mobile networks and provide service to its target
customers that is competitive with the services of other wireless communications
providers, Nextel would be unable, utilizing its existing analog SMR systems, to
provide mobile telephone services comparable to those provided by other wireless
communications systems operators or to achieve significant further subscriber
growth. See "-- Success of Nextel Is Dependent on Its Ability to Compete" and
"-- Forward Looking Statements."
Nextel and Motorola expect that system optimization activities will be a
continuing component of normal Digital Mobile network operation, and the
satisfactory resolution of certain system performance issues in a particular
market or at a particular stage of operation will not necessarily preclude the
need to address those issues again, for example, as a result of a significant
increase in the number of subscribers using the Digital Mobile networks.
Moreover, future upgrades or modifications may have unexpected adverse effects
on performance issues previously addressed. Each of Motorola and Nextel
believes, however, that a large portion of the hardware and software adjustments
developed in the course of system development and technology optimization
activities to address particular issues, and the resulting system performance
improvements realized, should be applicable to similar issues in different
markets. Nevertheless, as is often the case in the deployment of wireless
communications networks, it should be expected that there will be
market-specific characteristics, such as local terrain, topography, the number
of licensed frequencies, the utilization of adjacent radio frequencies and other
factors, that will require customized optimization activities to address related
system performance issues successfully. See "-- Forward Looking Statements."
Pursuant to the Second Equipment Agreement Amendment, Motorola has agreed
to use its best efforts to develop, and Nextel has agreed to implement when
developed, Reconfigured iDEN. The principal objective of the Reconfigured iDEN
development and deployment efforts is to achieve significant improvements in
voice transmission quality for the mobile telephone service provided on Nextel's
Digital Mobile networks. No assurance can be given that any modifications or
enhancements, including Reconfigured iDEN, designed to produce improvements in
the voice transmission quality of the mobile telephone services offered by the
Company will be developed successfully, or on the currently anticipated time
schedule, or that any such modifications or enhancements, if developed, would be
deployed in Nextel's Digital Mobile networks or, if deployed, would perform
successfully or would satisfy customer requirements, or that Nextel's mobile
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telephone services would be regarded as competitive in the wireless
communications services markets as such markets currently exist and as they are
expected to develop in the future. See "-- Forward Looking Statements."
Nextel continuously reviews alternate technologies as they are developed.
To date, however, it has not been regarded as necessary or as a commercially
feasible strategy to adapt currently available alternative technologies to
operate on Nextel's present spectrum position. Nextel continues to pursue
certain regulatory initiatives that would provide SMR operators, including
Nextel, with the right to use contiguous blocks of spectrum. The FCC issued an
order in December 1995 that would provide SMR operators, including Nextel, with
the opportunity to obtain contiguous spectrum. (See "-- Nextel's Prospects Are
Dependent on Governmental Regulation.") Were Nextel to obtain a sufficient
contiguous spectrum position in its market areas, pursuant to the FCC's 1995
order or otherwise, it would become feasible to consider deployment of currently
existing cellular digital technology transmission formats, including CDMA and
TDMA, on such contiguous spectrum blocks. Independent of such technological
feasibility, however, additional factors, including Nextel's contractual
obligations to Motorola regarding the deployment and utilization of first
generation iDEN and Reconfigured iDEN technology, and additional capital
requirements associated with any switch in technology, would likely materially
affect Nextel's consideration of such alternative technologies.
Should Nextel choose to deploy a technology other than iDEN for any of its
wireless communications services, Nextel believes that its systems planning and
its contractual relationships with Motorola would permit it to utilize a
different technology. In light of the development period for Reconfigured iDEN,
however, Nextel has agreed, in the Second Equipment Agreement Amendment, not to
effect a "Switch in Technology" prior to October 1, 1997 without Motorola's
consent. A Switch in Technology is defined in the Second Equipment Purchase
Agreement Amendment as a decision by Nextel before August 4, 1999 to install and
use digital radio frequency technology as an alternative to first generation
iDEN or Reconfigured iDEN on more than 25% of its SMR channels in the 806-824
MHz band in one or more of its top 20 markets, or the utilization by Nextel of
any of its SMR channels for voice interconnect on certain U.S. cellular and/or
PCS radio telephony standards. Due to the considerable present uncertainty
surrounding the factors that might affect such a decision, including the
performance characteristics and customer perceptions of first generation iDEN,
Reconfigured iDEN, or of competing digital technologies and possible future
improvements in first generation iDEN or Reconfigured iDEN technology, it is
impossible to predict if or when such a decision could be made.
NEXTEL TO REQUIRE FINANCING
Nextel anticipates that, for the foreseeable future, it will be utilizing
significant amounts of its available cash for capital expenditures for the
construction of Digital Mobile networks (including the anticipated conversion of
its existing Digital Mobile networks to utilize the Reconfigured iDEN technology
platform as described below under "-- Success of Nextel is Dependent on its
Ability to Compete"), operating expenses relating both to the Digital Mobile
networks and to Nextel's traditional analog SMR systems, potential acquisitions
(including the acquisition of rights to spectrum through the contemplated 800
MHz spectrum auction process, and investment in various potential international
wireless communications business opportunities) and corporate expenditures.
During fiscal year 1995, Nextel's average monthly cash utilization rate for
investing activities (principally attributable to capital expenditures for the
build-out of the Digital Mobile networks and acquisitions made during 1995) was
approximately $33,300,000, and its average monthly operating losses (exclusive
of non-cash items) was approximately $15,900,000. Such average amounts do not
reflect the investing activities and operating losses of Dial Page during such
fiscal year or such activities and losses of OneComm, AMS or Motorola's
operation of its 800 MHz SMR licenses in the continental U.S. (the "Motorola SMR
Business") for the portion of such fiscal year prior to completion of the
OneComm Transaction, the AMS Transaction and the Motorola Transaction,
respectively, and are not presented as representative of Nextel's anticipated
experience in such areas. Nextel anticipates that its cash utilization for
investment activities and operating losses will continue to exceed its cash
flows from operating activities over the next several years during the start-up
phase of its Digital Mobile networks and that it will be necessary for Nextel to
utilize its existing cash and funding from outside sources to meet its cash
needs resulting from such
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activities and losses. Nextel's aggregate cash, cash equivalents and marketable
securities at September 30, 1996 totaled approximately $224,506,000.
Nextel, Nextel Finance Company, a wholly owned subsidiary of Nextel
("NFC"), and certain subsidiaries of Nextel entered into definitive agreements,
which became effective on September 30, 1996, with respect to a secured credit
facility arranged by Chase Securities, Inc., J.P. Morgan Securities, Inc. and
Toronto-Dominion Securities (USA), Inc. (the "Bank Credit Facility").
Concurrently therewith, Nextel, NFC and certain subsidiaries of Nextel entered
into definitive agreements, which also became effective on September 30, 1996,
with respect to the amendment, restatement and consolidation of the previously
existing financing arrangements with Motorola and NTFC Capital Corporation
("NTFC") (the "Vendor Credit Facility").
The Credit Agreement relating to the Bank Credit Facility (the "Bank Credit
Agreement") provides for up to $1,655,000,000 of secured financing, consisting
of a $1,085,000,000 revolving loan and $570,000,000 in term loans. The Amended,
Restated and Consolidated Credit Agreement relating to the Vendor Credit
Facility (the "Vendor Credit Agreement") provides for up to $345,000,000 of
secured financing, consisting of a $195,000,000 revolving loan and $150,000,000
in term loans. Borrowings under the Bank Credit Facility and the Vendor Credit
Facility are ratably secured by liens on assets of Nextel's subsidiaries that
are "restricted" subsidiaries under the terms of Nextel's public indentures. At
September 30, 1996, Nextel had drawn approximately $368,000,000 of its available
financing under the Bank Credit Facility, leaving an aggregate of approximately
$1,287,000,000 available for borrowing under such facility, and had drawn
$150,000,000 of its available financing under the Vendor Credit Facility,
leaving an aggregate of approximately $195,000,000 available for borrowing under
such facility, subject in each case to the satisfaction or waiver of applicable
borrowing conditions.
Nextel believes that it has sufficient funds currently available or
reasonably expected to be accessible to it under its existing financing
facilities to meet its cash needs through the planned completion of its first
stage nationwide Digital Mobile networks build-out in 1998, in light of its
current (and currently committed) business and investment activities and
assuming a conservative ramp-up in Digital Mobile system subscriber growth.
Nextel currently anticipates that the funds available pursuant to the Bank
Credit Facility and the Vendor Credit Facility, together with the proceeds that
would be received by Nextel assuming the exercise of the currently outstanding
warrants and options to acquire shares of Nextel Common Stock described below
(which warrants and options are scheduled to expire unless exercised during such
time period), would be sufficient to permit both the full-scale implementation
of its nationwide Digital Mobile networks and the pursuit of its other strategic
objectives, including additional spectrum acquisition activities and
international investment opportunities. There can be no assurance, however, that
all such outstanding warrants and options will be exercised. Moreover, Nextel's
public indentures contain provisions that operate to limit the amount of
borrowings available under the Bank Credit Facility and the Vendor Credit
Facility in certain circumstances. In addition, Nextel's capital needs, and its
ability to adequately address those needs through debt or equity funding
sources, are subject to a variety of factors that cannot presently be predicted
with certainty, such as the commercial success of Nextel's Digital Mobile
networks incorporating the Reconfigured iDEN technology, the amount and timing
of Nextel's capital expenditures and operating losses, and the market price of
the Nextel Common Stock. See "-- Forward Looking Statements."
Nextel currently is aware of numerous factors and considerations, any one
or more of which could have a material effect on the timing and/or amount of the
future funding to be required by Nextel, but Nextel cannot currently quantify
with precision either the magnitude or the certainty of the effects associated
with any such factors. These factors include: (i) the timing of the anticipated
800 MHz spectrum auction process, and the amounts required to be bid to acquire
any or all of the available spectrum blocks in the major metropolitan market
areas where Nextel currently operates, or currently plans to operate, its
Digital Mobile network and the amounts that may be required to accomplish
retuning or acquisition of 800 MHz incumbent channels in spectrum blocks that
may be acquired by Nextel in the 800 MHz spectrum auction process; (ii) the
uncertainty with respect to the success and/or timing of the remaining
development activities relating to the Reconfigured iDEN technology format and,
assuming successful and timely completion of such efforts, the uncertainty with
respect to the success of commercial introduction and customer acceptance of
Nextel's
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Digital Mobile services that utilize such Reconfigured iDEN technology; (iii)
the potential commercial opportunities and risks associated with implementation
of Nextel's revised business plan premised on an anticipated aggressive campaign
to convert existing Digital Mobile networks to, and/or to construct new Digital
Mobile networks utilizing, the Reconfigured iDEN technology format; and (iv) the
net impact on Nextel's capital budget of certain developments currently expected
to increase capital needs (e.g., the additional capital needed if Nextel
acquires for cash additional spectrum in certain markets to increase the
capacity and/or efficiency of Nextel's operating Digital Mobile networks in such
markets, the additional capital needed for more extensive construction of
Digital Mobile networks in additional market areas acquired in the Dial Page
Transaction, the OneComm Transaction and the AMS Transaction and in connection
with the conversion of existing Digital Mobile networks to the Reconfigured iDEN
technology format, the short-term expenditures associated with analog SMR
station construction requirements under the currently effective FCC 800 MHz
channel licensing approach) that may be offset (whether wholly or partially) by
other developments anticipated to (or to have the potential to) reduce capital
needs (e.g., co-location of antenna and/or transmitter sites with other
providers of wireless services in the relevant markets, reductions in
infrastructure and subscriber unit prices obtained from Motorola pursuant to the
Second Equipment Agreement Amendment, alternative and more economical means for
increasing system capacity, other than constructing additional cell sites and/or
installing additional base radios, such as use of so-called "smart antennas,"
mini-cells and software-driven and/or system design performance enhancements).
Many of the foregoing involve elements wholly or partly beyond Nextel's control
or influence. See "-- Forward Looking Statements."
Other considerations in addition to the factors identified above may
significantly affect Nextel's decisions to seek additional financing, including
general economic conditions, conditions in the telecommunications and/or
wireless communications industry and the feasibility and attractiveness of
structuring particular financings for specific purposes (e.g., separate
capital-raising activities with respect to international activities and
opportunities). Finally, Nextel could obtain significant additional funds in
connection with the exercise of outstanding warrants and options, and the amount
and timing of receipt of such funds also would play a role in Nextel's
determinations concerning the need for or attractiveness of other potentially
available sources of financing. As Nextel has disclosed previously, full
exercise of the options granted to the McCaw Investor at the July 1995 closing
of the McCaw Transaction would result in the receipt by Nextel of approximately
$232,000,000, $277,500,000 and $107,500,000 of additional funds prior to July 29
in the years 1997, 1999 and 2001, respectively, full exercise of the warrants
issued to Comcast for 25,000,000 shares of Common Stock would result in the
receipt by Nextel of approximately $400,000,000 prior to September 16, 1997 and
full exercise of the warrants initially issued to Motorola for 3,000,000 shares
of Common Stock would result in the receipt by Nextel of approximately
$45,000,000. Finally, proceeds from the exercise by the McCaw Investor and/or by
Comcast of such parties' respective anti-dilutive rights to acquire additional
Nextel equity in connection with certain issuances by Nextel of its capital
stock and proceeds from the exercise of other warrants and options currently
outstanding and held by third parties, including options granted pursuant to the
Nextel Amended and Restated Incentive Equity Plan (including its predecessor
plans) and the Nextel Associate Stock Purchase Plan, may provide other available
sources of funding.
The foregoing discussion concerning potential exercise of various third
party rights to acquire shares of Nextel Common Stock is subject to the
qualification that no assurance can be given that any of such rights will be
exercised or, if exercised, that the contemplated investment will in fact be
consummated. In the case of the Bank Credit Facility and the Vendor Credit
Facility, there can be no assurance that the conditions to access such
facilities will be met. To the extent any of the aforementioned proceeds from
option and warrant exercises or financing arrangements are not available when
required, it will be necessary for Nextel to obtain alternate sources of
financing to meet its anticipated funding needs.
Nextel has had and may in the future have discussions with other parties
regarding potential equity investments and debt financing arrangements to
satisfy actual or anticipated financing needs. Pursuant to the Motorola
Transaction, Nextel has agreed, under certain circumstances, not to grant
superior governance rights to any third-party investor without Motorola's
consent, which may make securing equity investments more difficult. Motorola
consented with respect to the grant of superior governance rights by Nextel in
connection
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with the McCaw Transaction. The ability of Nextel to incur additional
indebtedness (including in certain circumstances, indebtedness incurred under
the Bank Credit Agreement and/or the Vendor Credit facility) is and will be
limited by the terms of (1) the indentures for Nextel's senior redeemable
discount notes due 2003 and 2004, respectively (collectively, the "Nextel
Indentures"), OneComm's Indenture for its Senior Redeemable Discount Notes due
2004 (the "OneComm Indenture") and Dial Page's Indentures for its Senior
Redeemable Discount Notes due 2004 and its Senior Redeemable Discount Notes due
2005 (collectively, the "Dial Call Indentures"), which notes were initially
issued by Dial Call Communications, Inc., a wholly owned subsidiary of Dial Page
that was merged with and into Dial Page in connection with the Dial Page
Transaction and (2) the Bank Credit Agreement and the Vendor Credit Agreement.
The Bank Credit Agreement and the Vendor Credit Agreement also require Nextel
and its relevant subsidiaries to satisfy certain financial covenants or ratios
including those specifically related to leverage.
At present, other than the existing equity or debt financing arrangements
that have been consummated and/or disclosed, Nextel has no commitments or
understandings with any third parties to obtain any material amount of
additional equity or debt financing. Moreover, no assurances can be made that
Nextel will be able to obtain any such additional financing in the amounts or at
the times such financing may be required, nor that, if obtained, any such
financing would be on acceptable terms. Nextel also anticipates that it will
continue to experience significant net losses during the ongoing start up phase
of the Digital Mobile networks over the next several years. Accordingly, there
can be no assurances as to whether or when the operations of Nextel will become
profitable. As a result of Nextel's anticipated continuing losses, the
uncertainty regarding the exercise of options and warrants, the availability of
financing under the Bank Credit Facility and the Vendor Credit Facility and the
impact of Reconfigured iDEN and other matters discussed above, there can be no
assurance that Nextel will have adequate capital to implement the nationwide
build-out of its Digital Mobile networks without obtaining additional financing
and/or alternative financing sources. See "-- Forward Looking Statements."
SUCCESS OF NEXTEL IS DEPENDENT ON ITS ABILITY TO COMPETE
Nextel's success depends on its Digital Mobile networks' ability to compete
with other wireless communications systems in each relevant market and its
ability to successfully market integrated wireless communication services.
Nextel is continuing to focus its marketing efforts on attracting customers
from its previously-identified targeted groups of potential subscribers, its
existing analog SMR dispatch system subscribers and other business users
including current users of multiple wireless communications services and those
new users who may be attracted to the combination of services made possible by
its Digital Mobile networks. Nextel's strategy is to focus on multi-service
business users in its markets with Digital Mobile networks, and as of September
30, 1996 approximately 228,000 Digital Mobile units were in service.
Prior to the second quarter of 1996, Nextel implemented its Digital Mobile
networks in its market areas using Motorola's "first generation" iDEN
technology. During that time frame, Nextel encountered certain technology and
system performance issues relating to the "first generation" iDEN technology
that resulted in delays in the implementation of its plans to deploy its Digital
Mobile networks and in the commencement of aggressive marketing efforts with
respect to its communications products and services, particularly its mobile
telephone services. These technology and system performance issues related
primarily to the voice transmission quality of the mobile telephone service.
In response to these issues, Nextel and Motorola have undertaken, and
continue to undertake, system enhancement efforts to address various
circumstances believed to adversely affect system performance and customer
satisfaction, particularly those associated with voice transmission quality.
Nextel anticipates that such system enhancement efforts will be a continuing
component of the normal ongoing technology optimization process. Additionally,
independent of such system enhancement efforts, Nextel, together with Motorola,
is pursuing a significant program directed toward the development and deployment
of modifications to the "first generation" iDEN technology platform, to be known
as Reconfigured iDEN, designed principally to produce improvements in voice
transmission quality. Nextel and Motorola have been encouraged by their
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experience to date in the Reconfigured iDEN development and deployment process.
All significant technology performance benchmarks, development progress targets
and key event schedules relating to the development and deployment of
Reconfigured iDEN have been achieved or satisfied to date substantially as
contemplated and originally agreed to by Nextel and Motorola.
Based on its experiences with the Reconfigured iDEN technology, including
the feedback received in customer trials and various other inputs and
considerations, the Company announced the first full-scale commercial launch of
the Reconfigured iDEN Digital Mobile network in the Chicago market late in the
third quarter of 1996, accompanied by the commencement of a more broadly-focused
marketing campaign in that market area.
In October and November 1996, Nextel announced full-scale commercial
launches, accompanied by more broadly-focused marketing campaigns, in the
Atlanta, Boston, Denver, Detroit and Las Vegas markets. Nextel's commercial
launch activities in these markets represent the first phase of an anticipated
rapid nationwide deployment of the Reconfigured iDEN technology in Nextel's
significant Digital Mobile markets. Nextel currently is developing and refining
a nationwide build-out plan for Digital Mobile networks incorporating the
Reconfigured iDEN technology based on an anticipated implementation schedule
during 1996 to 1998, which it currently expects will involve budgeted capital
expenditures totaling approximately $1.2 billion. In this connection, Nextel
anticipates that purchases of Motorola-manufactured infrastructure equipment
will represent the largest category of capital spending. Since June 1996, Nextel
has placed orders with Motorola totaling more than $300 million of products
incorporating the Reconfigured iDEN technology, including system infrastructure
equipment and related software and the new, compact Reconfigured iDEN handsets
that Nextel plans to market nationally, principally under the "PowerFone"(R)(TM)
brand name. Assuming the successful and timely completion of such build-out
plan, Nextel expects that its Digital Mobile networks would provide coverage to
areas representing approximately 85% of the United States population by the end
of 1998. Implementation of such a rapid nationwide deployment strategy for
Reconfigured iDEN would likely significantly accelerate Nextel's use of and
needs for capital resources and would therefore be dependent on, among other
things, availability of necessary capital. See also "Nextel to Require
Financing" and "Forward-Looking Statements."
No assurance can be given that any modifications or enhancements, including
Reconfigured iDEN, designed to produce improvements in the voice transmission
quality of mobile telephone services offered by the Company, will be developed
and deployed successfully, or on the currently anticipated time schedule, or
that any modifications or enhancements, if developed, would be deployed in
Nextel's Digital Mobile networks or, if deployed, would perform successfully or
would satisfy customer requirements, or that Nextel's mobile telephone services
would be regarded as competitive in the wireless communications services markets
as such markets currently exist and as they are expected to develop in the
future. See "-- Forward Looking Statements."
The Company believes that its ability to provide a full line of mobile
communications services in an integrated package on its Digital Mobile networks
will distinguish it from other providers of wireless communications services.
The focus and the progress of Nextel's Digital Mobile network services marketing
efforts is and will continue to be dependent on a number of factors, including
system performance, subscriber equipment performance and the ability to provide
services that satisfy customer needs and expectations. Nextel reviews its
business and marketing plans in light of a variety of factors, including
perceived opportunities, actual experiences in the marketplace, availability of
financial and other resources and overall economic and/or competitive
considerations, and may from time to time determine to change, refine or
redirect such plans. See "-- Forward Looking Statements."
Following implementation of its Digital Mobile networks and completion of
related system optimization activities, the Company's Digital Mobile networks
will compete with established and future wireless operators in its efforts to
attract mobile telephone customers, dealers and possibly resellers to its
service in each of the markets in which it operates a Digital Mobile network.
Although the Company has determined that the voice transmission quality issues
encountered to date in its first generation iDEN Digital Mobile networks must be
resolved satisfactorily before the Company begins to market mobile telephone
services aggressively in any of
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its markets in which the "first generation" iDEN technology is being utilized,
the Company believes that, following scheduled software upgrades and additional
system optimization efforts and equipment and technology enhancements expected
to continue during 1996, and following the development and commercial deployment
of Reconfigured iDEN, Nextel's Digital Mobile networks will have the capacity,
functionality and quality of service necessary to be competitive with current
wireless communications services in the markets in which the Company operates
Digital Mobile networks. Nextel's ability to compete effectively with other
wireless communications service providers, however, will depend on the
successful resolution of such system performance issues, and no assurance can be
given that such issues will be resolved. See "-- Forward Looking Statements."
While Nextel believes that the mobile telephone service to be provided on
its Digital Mobile networks utilizing the Reconfigured iDEN technology will be
similar to other current wireless communications services in certain respects,
as discussed under "-- Implementation of Digital Mobile Networks Subject to
Risks of Developing Technology," there are (and will in certain cases continue
to be) differences between the services provided by Nextel and by cellular
operators and the performance of their respective systems. As a result of these
differences, there can be no assurance that Digital Mobile network mobile
telephone services will be competitive with other providers of mobile telephone
services. As part of its marketing strategy, Nextel will attempt to emphasize
the benefits to its subscribers of obtaining an integrated package of services
consisting of dispatch radio, paging services and mobile telephone, and in the
future, data transmission. Cellular operators currently do not provide such
integrated services, but recent FCC rulings permit cellular operators to offer
two-way dispatch services. If cellular operators do provide dispatch services in
the future, Nextel's competitive advantage from using such a marketing strategy
may be impaired.
Nextel will not be able to provide roaming service comparable to that
currently available from cellular operators, which have roaming agreements among
each other, unless and until system build-out is completed. Moreover, the
cellular systems in each of Nextel's markets, as well as in the markets in which
Nextel expects to provide services in the future, have been operational for a
number of years and such operators currently service a significant subscriber
base and typically have significantly greater financial and other resources than
those available to Nextel. As is true for cellular operators, the
interconnection of subscriber units with the public switched telephone network
requires Nextel to purchase certain exchange and inter-exchange services from
telephone companies and certain other common carriers.
Subscriber units on the Digital Mobile networks will not be compatible with
cellular systems, and vice versa. This lack of inter-operability may impede the
Company's ability to attract cellular subscribers or those new mobile telephone
subscribers that desire the ability to access different service providers in the
same market. Nextel currently markets a multi-function subscriber unit that is
significantly more expensive than analog or digital cellular handsets that do
not incorporate multi-function capability. The prices expected to be charged to
Nextel for the subscriber handsets to be used by Nextel's customers will be
higher than those charged to operators for analog cellular handsets and may be
higher than those charged to operators for digital cellular handsets. During the
transition to digital technology, certain participants in the United States
cellular industry are offering subscriber units with dual mode (analog and
digital) compatibility. There can be no assurances that existing analog SMR
customers will be willing to invest in new subscriber equipment necessary to
migrate to the Digital Mobile networks. Moreover, because many of the cellular
operators in Nextel's markets have substantially greater financial resources
than Nextel, such operators may be able to offer prospective customers equipment
subsidies or discounts that are substantially greater than those, if any, that
could be offered by Nextel. Thus, Nextel's ability to compete based on the price
of subscriber equipment will be limited. Nextel cannot predict the competitive
effect that any of these factors, or any combination thereof, will have on
Nextel. See "-- Forward Looking Statements."
Cellular operators and certain entities that have been awarded PCS licenses
each control more spectrum than is allocated for SMR service in each of the
relevant market areas. Each cellular operator is licensed to operate 25 MHz of
spectrum and certain PCS licensees have been licensed for 30 MHz of spectrum in
the markets in which they are licensed, while 14 MHz is allocated in the 800 MHz
band to all SMR systems, including Nextel's systems, in those markets. The
control of more spectrum gives cellular operators and such PCS licensees the
potential for more system capacity, and, therefore, more subscribers, than SMR
operators,
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including the Company. The Company believes that it generally has adequate
spectrum to provide the capacity needed on its Digital Mobile networks for the
foreseeable future. See "-- Forward Looking Statements."
Nextel expects to face competition from other technologies and services
introduced in the future, including PCS. The FCC has described PCS as a digital,
wireless communications system consisting of a variety of new mobile and
portable services and technologies, using small, lightweight units. PCS services
may include portable, two-way voice and data services. The FCC has allocated 120
MHz of spectrum in the 1.8-2.2 GHz band for the provision of PCS, which may
include mobile wireless communications services similar to those provided over
Nextel's Digital Mobile networks. FCC licenses for this spectrum have been and
are to be awarded through a competitive bidding process and have been and will
be granted on a geographic basis for either a Major Trading Area ("MTA") or a
Basic Trading Area ("BTA") (each as defined in the Rand McNally Commercial
Atlas). Three 30 MHz licenses and three 10 MHz licenses (or licenses for a total
of 120 MHz of spectrum) will be awarded in each market. The first broadband PCS
auction, in which two 30 MHz licenses were awarded in each MTA in the United
States, began on December 5, 1994 and was completed on March 13, 1995. A
substantial number of the entities that were awarded 30 MHz PCS licenses in this
auction were current cellular communications service providers and joint
ventures of current and potential wireless communications service providers,
many of which have financial resources greater than those of Nextel. The next
PCS auction, which is limited to parties that meet specific size limitations,
was originally scheduled to begin on August 2, 1995. However, a U.S. Supreme
Court decision striking down an affirmative action program delayed the start of
the auction while the FCC attempted to bring its "designated entity rules," i.e.
special provisions intended to assist women, minorities, and small businesses,
into compliance with the Supreme Court's decision. That auction, which assigned
an additional BTA-based 10 MHz PCS license, concluded on May 6, 1996. The
auction of three additional 10 MHz PCS license blocks, which began on August 26,
1996, is ongoing. Although certain limited PCS offerings have commenced, it is
not clear how PCS will develop or when such services will be available in all of
Nextel's markets. PCS will likely compete with some or all of the services
provided over Nextel's Digital Mobile networks. See "-- Forward Looking
Statements."
Pursuant to the Omnibus Appropriations Act of 1997, the FCC must reallocate
30 MHz of spectrum to wireless services and assign that spectrum via an auction
that must commence no later than April 15, 1997. The FCC is proposing to allow
these licenses to offer a broad range of fixed and mobile services, but no final
rules have been adopted.
In addition, the FCC has reallocated 220 MHz of radio spectrum for use by
"emerging telecommunications technologies," such as PCS, low-earth orbit
satellites and mobile satellite systems. The FCC has authorized a consortium of
communications companies to provide nationwide mobile satellite services. Nextel
cannot predict how these technologies will develop or what impact, if any, they
will have on Nextel's ability to compete for wireless communications customers.
RELIANCE ON ONE PRINCIPAL SUPPLIER IN IMPLEMENTATION OF DIGITAL MOBILE NETWORKS
Pursuant to existing equipment purchase agreements (the "Equipment Purchase
Agreements") between Nextel and Motorola, first entered into in 1991, as
subsequently amended by the amendment entered into in connection with the
Motorola Transaction (the "Prior Equipment Agreement Amendment") and by the
Second Equipment Agreement Amendment entered into in connection with the McCaw
Transaction, Motorola provides the iDEN infrastructure and subscriber handset
equipment to Nextel throughout its markets. The Company expects that it will
need to rely on Motorola for the manufacture of a substantial portion of the
equipment necessary to construct its Digital Mobile networks for the foreseeable
future. The Equipment Purchase Agreements, as amended, include a commitment from
Nextel to purchase from Motorola a significant amount of system infrastructure
equipment, which will be subject to financing arrangements with Motorola. Nextel
has, among other things, agreed (subject to certain conditions) to purchase and
install iDEN equipment during the four-year and six-year periods beginning on
August 4, 1994 sufficient to cover 70% and 85%, respectively, of the United
States population. In addition, subject to the applicable terms and conditions
under the Second Equipment Agreement Amendment, Nextel has agreed to
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deploy Reconfigured iDEN and, until August 4, 1999 and subject to certain
conditions, to purchase from Motorola at least 50% of the base radios Nextel
purchases in any calendar year. Motorola estimated at the time the Second
Equipment Agreement Amendment was entered into that such commitments to purchase
base radios and associated infrastructure equipment could have an aggregate
purchase price in excess of approximately $750,000,000, although the amount may
be higher or lower depending on circumstances such as systems design, changes in
the producer price index, the timing of purchases or other cost adjustments or
the success of Nextel's marketing plan. See "-- Success of Nextel is Dependent
on its Ability to Compete" and "-- Forward Looking Statements." Such commitments
are in addition to amounts purchased from Motorola or for which Nextel, OneComm
or Dial Page had placed orders with Motorola prior to August 4, 1994, which
orders, in the case of OneComm and Dial Page, have become obligations of Nextel.
See "-- Nextel to Require Financing."
The Second Equipment Agreement Amendment places certain limits on Nextel's
ability to use other technologies as an alternative to first generation iDEN or
Reconfigured iDEN. See "-- Implementation of Digital Mobile Networks Subject to
Risks of Developing Technology."
It is expected that for the first few years of Digital Mobile network
operations by Nextel, Motorola and competing manufacturers who are licensed by
Motorola (including Matsushita Communication Industrial Co., Ltd.
("Matsushita"), which has executed a definitive license agreement with Motorola
to employ Motorola's proprietary technology) will be the only manufacturers of
subscriber equipment that is compatible with Nextel's Digital Mobile networks.
The Prior Equipment Agreement Amendment provides for the licensing by Motorola
of interfaces relating to infrastructure and subscriber equipment and of
additional manufacturers for subscriber equipment. In connection with the Second
Equipment Agreement Amendment, Motorola further agreed to negotiate to enter
into licenses with at least one alternative manufacturer of iDEN infrastructure
equipment.
NEXTEL'S PROSPECTS ARE DEPENDENT ON GOVERNMENTAL REGULATION
The licensing, operation, acquisition and sale of Nextel's SMR businesses
are regulated by the FCC. Nextel's subsidiaries currently hold FCC licenses to
use SMR radio channels in each of their markets. Traditionally, these licenses
have been granted by the FCC on a site-by-site basis. Under current regulations,
SMR base stations generally must be a minimum of 70 miles away from all other
SMR base stations operating on the same frequencies. The licenses typically must
be constructed and operational within one year of grant or the licenses will
cancel automatically.
To use its SMR channels to provide Digital Mobile network service, Nextel
currently is required to obtain additional site authorizations from the FCC for
transmitter sites in each of its markets. Additional site authorizations must be
obtained from the FCC for the transmitter sites that will be associated with
development and implementation of Digital Mobile networks. Assuming such site
authorizations are obtained initially, they will be subject to renewal, but may
be canceled if the respective sites for Digital Mobile networks are not
constructed in the relevant markets within a prescribed time after issuance,
typically one year or five years. There can be no assurance that any such SMR
license will be renewed upon the expiration of its ten-year term. Each SMR
license also may be revoked for cause at any time such a determination is made
by the FCC.
Since August 1994, the FCC has suspended the SMR licensing process (1) due
to an extraordinarily large backlog of license applications, and (2) to
stabilize the licensing landscape in preparation for new SMR licensing rules and
regulations. Although the FCC established a waiver process whereby parties could
obtain SMR licenses if they could show that their application (a) affects only
channels on which the applicant is already permanently licensed and (b) affects
coverage only within the applicant's geographic area, the FCC has failed to act
on a single waiver application of Nextel or, to Nextel's knowledge, any other
SMR licensee. However, on October 23, 1996, the Chief of the Wireless
Telecommunications Bureau issued an Order directing the FCC's Licensing Division
to process the applications. At this time, none of the applications have been
granted or denied.
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During the suspension of the licensing process, the FCC was able, with the
assistance of industry trade groups, to process the backlogged applications.
Although many of the license grants and denials are subject to petitions for
reconsideration, it appears that a number of Nextel's applications have been
granted, all of which further the implementation of Nextel's Digital Mobile
networks. The FCC has also suspended acceptance of applications proposing new or
modified stations on any of the 150 general category (prospectively SMR-only)
channels, pending implementation of the new SMR licensing rules described below.
On December 15, 1995, the FCC released new 800 MHz SMR licensing rules that
provide geographic-area based licenses for SMR operators. According to these
rules, the prospective licensing of Nextel's systems may no longer be made on
the site-by-site basis described above. The new rules require the use of
auctions to license the top 200 SMR channels on an Economic Area ("EA") basis in
three blocks: a 120-channel block, a 60-channel block, and a 20-channel block.
Successful bidding in such auctions will be required to obtain such an EA-based
block license. Once an EA license is obtained, the EA licensee will have the
ability to construct, operate and modify its systems within the licensed
geographic area without first obtaining FCC approval. All EA licensees will be
required to construct and operate their systems to provide service to one-third
of the population within two years, and two-thirds of the population within five
years using more than 50% of the EA licensee's channels. Failure to meet these
EA license requirements will likely result in the loss of the EA license.
An EA licensee will have the authority to relocate incumbents in the EA
licensed area to the lower 80 SMR channels and the 150 general category channels
(which the FCC will prospectively license only to SMR operators). Any incumbent
that is not relocated out of the top 200 channels will be provided co-channel
protection by the EA licensee. Those incumbents will not be allowed to expand
their systems within the EA licensed area, but they will be permitted to make
modifications that do not expand their current interference contour. These
incumbents will also be offered an opportunity to convert their current
site-by-site licenses to a single license encompassing their existing authorized
service area contours. Consequently, Nextel may be subject to relocation of any
of the top 200 SMR channels for which it currently holds licenses if it is
unsuccessful in obtaining the EA license for those channels. In addition,
Nextel's ability to expand its systems may be limited on those channels for
which it does not obtain an EA license.
The FCC adopted the new 800 MHz SMR licensing rules to fulfill its mandate
under the Omnibus Budget Reconciliation Act of 1993, which reclassified
interconnected SMR service as "Commercial Mobile Radio Services" ("CMRS"), a
common carrier service, and required that such services be regulated similarly
to cellular and PCS. Petitions for reconsideration of the new 800 MHz SMR
licensing rules were filed with the FCC on March 18, 1996. Oppositions to those
petitions, including one filed by Nextel, were filed with the FCC on April 16,
1996, and replies to such oppositions were filed on May 1, 1996. The resolution
of these petitions could adversely affect the impact of those rules on Nextel.
The ultimate outcome of the FCC's 800 MHz SMR rule makings, including actions by
third parties taken in accordance therewith, could be adverse to Nextel.
In conjunction with the release of the new 800 MHz SMR licensing rules, the
FCC issued a Second Further Notice of Proposed Rule Making (the "Notice") to
establish operational rules and auction procedures for the lower 80 SMR channels
and the 150 general category (now SMR-only) channels. The Notice proposes EA
licensing for these channels through auctions and proposes no relocation of
incumbents to alternate channels. The proposed auction rules would set aside
these channels for "entrepreneur blocks" for small businesses. The bidding for
such blocks of channels would be restricted to entities of a certain economic
size. As proposed, those auction rules would likely exclude Nextel from
eligibility to bid on the "entrepreneur block" EA licenses.
Nextel has filed comments and reply comments, including a joint pleading
with SMR WON (a trade association of small but traditional SMR operators) and
the American Mobile Telecommunications Association ("AMTA"), each of which
initially opposed the FCC's new licensing rules for the upper 200 SMR channels.
The joint pleading is a consensus proposal that, among other things, opposes a
set aside of all the lower channels. The consensus proposal also includes a
pre-auction settlement process for the lower channels whereby incumbents,
including licensees who have been relocated out of the upper 200 channels, could
enter
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into, among other things, partnerships, consortia or buyouts to determine who
would be licensed on each individual channel on the lower channels on an EA
basis. Any channel that is not settled, i.e., continues to have more than one
unaffiliated party licensed on it in a particular EA, would be subject to an
auction. The Personal Communications Industry Association has joined Nextel, SMR
WON and AMTA in the consensus proposal. The FCC is still considering its
proposed rules for the lower channels, and has indicated that it may issue final
rules by the end of 1996.
Among the other regulatory changes the FCC has made in the last two years
to ensure that SMR operators are provided regulatory parity with cellular and
PCS operators are: (1) a 45 MHz CMRS spectrum cap for all CMRS providers (with a
10 MHz limit on the amount of SMR spectrum that can be attributed to a single
entity); (2) elimination of the prohibition on wireline participation in SMR
services; (3) elimination of the restriction on cellular licensees providing
dispatch services; (4) a duty not to restrict resale of services; (5) a duty to
provide telephone number portability; and (6) a duty to provide enhanced 911
services and roaming capabilities. As a CMRS provider, Nextel is subject to
limitations in the Communications Act of 1934, as amended (the "Communications
Act"), concerning foreign investment in and ownership of FCC licenses. Certain
of these regulatory changes could require operational or technological changes
in Nextel's Digital Mobile networks.
Future changes in regulation or legislation affecting Digital Mobile
network service or the allocation by the FCC or the United States Congress of
additional spectrum for services that compete with such service could materially
adversely affect Nextel's business.
NEXTEL'S ASSETS PRIMARILY CONSIST OF INTANGIBLE FCC LICENSES
Nextel's assets consist primarily of intangible assets, principally FCC
licenses, the value of which will depend significantly upon the success of
Nextel's business and the growth of the SMR and wireless communications
industries in general. In the event of default on indebtedness or liquidation of
Nextel, there can be no assurance that the value of these assets will be
sufficient to satisfy its obligations. Nextel had a negative net tangible book
value of $934,767,000 as of September 30, 1996.
NEXTEL SUSCEPTIBLE TO CONTROL BY SIGNIFICANT STOCKHOLDERS
Based on securities ownership information relating to Nextel as of November
30, 1996, and giving effect to the conversion of the outstanding shares of
Nextel's preferred stock and the exercise in full of (i) three separate options
held by the McCaw Investor exercisable for periods of two, four and six years,
respectively, from July 28, 1995, to acquire an aggregate of up to 35,000,000
shares of Nextel Common Stock at exercise prices ranging from $15.50 to $21.50
per share (the "McCaw Options"), (ii) the option held by Eagle River, Inc., an
affiliate of the McCaw Investor, to purchase an aggregate of 1,000,000 shares of
Nextel Common Stock at an exercise price of $12.25, which option vests over a
five-year period from April 4, 1995 (the "Incentive Option"), (iii) the options
granted on July 28, 1995 to the McCaw Investor by Motorola to purchase up to
9,000,000 shares of Nextel Common Stock over a six-year period (the "McCaw
Investor/Motorola Options"), (iv) a warrant held by Motorola to purchase
2,890,000 shares, and (v) the option held by Comcast and its affiliates to
purchase up to 25,000,000 shares of Nextel Common Stock at a per share exercise
price of $16.00, a portion of which is currently exercisable (the "Comcast
Option"), the McCaw Investor would hold approximately 23.8%, Motorola would hold
approximately 16.3%, and Comcast (together with Comcast FCI) would hold
approximately 8.9% (4.8% without giving effect to the exercise of options which
by their terms are not presently exercisable but, in each case, after giving
effect to sales of shares of Nextel Common Stock by Comcast as described in
"-- Potential Dilution From Pending and Future Transactions") of the Nextel
Common Stock outstanding as of such date.
In connection with the consummation of the McCaw Transaction and pursuant
to the Securities Purchase Agreement dated as of April 4, 1995, as amended,
among Nextel, the McCaw Investor and Mr. Craig O. McCaw (the "McCaw Securities
Purchase Agreement"), the McCaw Investor has the right to designate not less
than 25% of the Board of Directors of Nextel (the "Nextel Board"). Additionally,
the
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McCaw Investor is entitled to have a majority of the members of the Operations
Committee of the Nextel Board selected from the McCaw Investor's representatives
on the Nextel Board. The Operations Committee has the authority to formulate key
aspects of Nextel's business strategy, including decisions relating to the
technology used by Nextel (subject to existing equipment purchase agreements),
acquisitions, the creation and approval of operating and capital budgets and
marketing and strategic plans, approval of financing plans, endorsement of
nominees to the Nextel Board and committees thereof and nomination and oversight
of certain executive officers. As a result, based upon the McCaw Investor's
stock ownership position, as well as its ability to designate at least 25% of
the members of the Nextel Board and control the Operations Committee, the McCaw
Investor is in a position to exert significant influence over Nextel's affairs.
The Nextel Board retains the authority to override actions taken or proposed to
be taken by the Operations Committee, subject, in certain circumstances, to
certain financial consequences. The creation and existence of the Operations
Committee does not change the normal fiduciary duties of the Nextel Board,
including fiduciary duties in connection with any proposal to override any
action of or to terminate the Operations Committee, whether or not such action
would give rise to such financial consequences. In addition, Comcast as a Nextel
stockholder has certain contractual rights to designate one or more members
(depending on its ownership percentage) to the Nextel Board, although at present
no Comcast designee is a member of the Nextel Board. Although Motorola is
entitled to nominate two directors to the Nextel Board, presently only one
person designated by Motorola is a Nextel director. Pursuant to an amendment to
the Agreement and Plan of Contribution and Merger dated as of April 4, 1995, by
and among Nextel, Motorola and certain subsidiaries of Motorola (the "Motorola
Amendment"), Motorola has agreed to support the decisions and recommendations of
the Operations Committee and to vote the shares of Common Stock held by it
accordingly, subject to (1) the right of any Motorola-designated Nextel
directors to vote in a manner consistent with their fiduciary duties and (2) the
right of Motorola to vote its shares as it determines necessary with respect to
issues that conflict with Motorola's corporate ethics or that present conflicts
of interest, or in order to protect the value or marketability of the shares of
Nextel Common Stock held by it.
Based upon their respective ownership positions, if the McCaw Investor and
Motorola chose to act together, such parties could have a sufficient voting
interest in Nextel, among other things, to (1) exert effective control over the
approval of amendments to Nextel's Certificate of Incorporation (the "Nextel
Charter"), mergers, sales of assets or other major corporate transactions as
well as other matters submitted for stockholder vote, (2) defeat a takeover
attempt, and (3) otherwise control whether particular matters are submitted for
a vote of the stockholders of Nextel. Although Motorola has made certain
commitments as described in the last sentence of the preceding paragraph, Nextel
is not aware of any current agreements among the McCaw Investor and Motorola
with respect to the ownership or voting of Nextel Common Stock and neither
Motorola nor the McCaw Investor has indicated to Nextel that it has any present
intention to seek to exercise such control. Pursuant to the McCaw Securities
Purchase Agreement, the McCaw Investor has agreed that it will not vote for any
nominee to the Nextel Board other than persons it is entitled to designate under
the terms of the securities it owns or of the McCaw Securities Purchase
Agreement. Upon request of Nextel, the McCaw Investor has also agreed to cause
shares of Nextel Common Stock, the voting of which is controlled by it or its
affiliates, to be voted in a manner proportionate to the votes of other holders
of Nextel Common Stock in the election of directors so designated by the Nextel
Board.
Each of the McCaw Investor and Motorola has and (subject to the terms of
applicable agreements between such parties and Nextel) may have an investment or
interest in entities that provide wireless telecommunications services that
could potentially compete with Nextel. Under the McCaw Securities Purchase
Agreement, the McCaw Investor, Mr. McCaw and their Controlled Affiliates (as
defined in the McCaw Securities Purchase Agreement) may not, for a period of
time after consummation of the McCaw Transaction, participate in other twoway
terrestrial-based mobile wireless communications systems in the region that
includes any part of North America or South America unless such opportunities
have first been presented to and rejected by Nextel in accordance with the
provisions of the McCaw Securities Purchase Agreement. Such limitation is
subject to certain limited exceptions, including certain existing securities
holdings and relationships (and expressly including Mr. McCaw's investment in
AT&T resulting from AT&T's acquisition of McCaw Cellular Communications, Inc.,
which investment may not exceed 3% of the
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outstanding stock of AT&T). Such restrictions terminate on the later to occur of
July 28, 2000 or one year after the termination of the Operations Committee.
POTENTIAL DILUTION FROM PENDING AND FUTURE TRANSACTIONS
As indicated elsewhere in this Proxy Statement/Prospectus, Nextel has
commitments, and from time to time may enter into additional commitments, to
issue a substantial number of new shares of Nextel Common Stock.
As of November 30, 1996, there were approximately 252,106,000 shares of
Nextel Common Stock outstanding (assuming the conversion of the outstanding
shares of Nextel's preferred stock), on a primary, rather than a fully diluted,
basis, and approximately 342,137,000 shares of Nextel Common Stock outstanding
assuming the exercise of all options (including employee options, the Comcast
Option for 25,000,000 shares, which expires in September 1997, Motorola's
warrant to purchase 2,890,000 shares, the options to purchase an aggregate of
36,000,000 shares pursuant to the McCaw Options and the Incentive Option and the
exercise of the McCaw Investor's anti-dilutive rights to purchase 373,846
shares), warrants and other existing rights to acquire Nextel Common Stock.
On April 29, 1996, the Commission declared effective the Company's
registration statement on Form S-4, covering 10,000,000 shares of Nextel Common
Stock, or warrants to acquire such shares, which contemplates issuances from
time to time on a "shelf" basis in accordance with Rule 415(a)(1)(viii)
promulgated under the Securities Act in connection with acquisitions of other
businesses, properties or securities in business combination transactions. As of
the date hereof, the Company has not issued any of such Common Stock or
warrants. Additionally, on April 29, 1996, the Commission declared effective the
Company's registration statement on Form S-3, covering 8,848,469 shares of
Common Stock, which was filed by Nextel on behalf of Comcast and Comcast FCI in
satisfaction of the Company's obligations pursuant to the registration rights of
Comcast and Comcast FCI. According to the most recent amendment to the Schedule
13D of Comcast filed on October 1, 1996, Comcast and Comcast FCI have sold an
aggregate of 5,570,000 of such shares of Common Stock pursuant to brokerage
transactions.
Pursuant to the McCaw Securities Purchase Agreement, the McCaw Investor was
granted anti-dilutive rights with respect to certain Nextel share issuances,
which rights and related terms are largely comparable to the Comcast Purchase
Right (the "McCaw Purchase Right"). In connection with the issuance of shares in
connection with an acquisition, the McCaw Investor exercised its anti-dilutive
rights, which resulted in the sale of 373,846 treasury shares of Nextel Common
Stock to the McCaw Investor on November 26, 1996. An increase in the number of
shares of Common Stock that will become available for sale in the public market
may adversely affect the market price of Common Stock and could impair Nextel's
ability to raise additional capital through the sale of its equity securities.
SHARES ELIGIBLE FOR FUTURE SALE
Existing holders of Nextel Common Stock generally may freely resell their
shares except to the extent that they are deemed to be affiliates of Nextel or
certain predecessor companies for purposes of Rule 144 ("Rule 144") or Rule 145
promulgated under the Securities Act. Nextel has also granted registration
rights with respect to a significant number of its shares outstanding, on a
fully diluted basis including shares of Nextel Common Stock issuable upon
conversion of securities issued in, or upon exercise of options granted in, the
Motorola Transaction and the McCaw Transaction. The exercise of registration
rights by affiliates of Nextel would permit such persons to sell such shares
without regard to the limitations of Rule 144. Registration rights covering a
total of approximately 190,000,000 shares of Nextel Common Stock have been
granted to, among others, the McCaw Investor and certain of its affiliates,
Comcast FCI, Matsushita, Nippon Telegraph and Telephone Corporation ("NTT") and
Motorola. An increase in the number of shares of Common Stock that will become
available for sale in the public market may adversely affect the market price of
Nextel Common Stock and could impair Nextel's ability to raise additional
capital through the sale of its equity securities.
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DIVIDEND POLICY LIMITS EXPECTATION OF FUTURE DIVIDENDS
Except for certain dividends paid with respect to preferred stock that was
converted into Common Stock in connection with Nextel's initial public offering
in 1992, Nextel has not paid any dividends on Nextel Common Stock. Nextel does
not plan to pay dividends on Nextel Common Stock for the foreseeable future.
The Nextel Indentures, the Dial Call Indentures, the OneComm Indenture, the
Bank Credit Agreement and the Vendor Credit Agreement place significant
restrictions on Nextel's ability to pay dividends. In addition, the collateral
security mechanisms and related provisions associated with the Bank Credit
Agreement and the Vendor Credit Agreement may be expected to limit the amount of
cash available to make dividends, loans and cash distributions to Nextel from
Nextel's subsidiaries that will operate Digital Mobile networks in Nextel's
existing markets, so that, while such limitations are in place, profits
generated by such subsidiaries will not be available to Nextel for, among other
purposes, the payment of dividends on shares of Nextel Common Stock.
POTENTIAL CONFLICT OF INTEREST RELATIONSHIP WITH MOTOROLA MAY AFFECT NEXTEL'S
PROSPECTS
Motorola and its affiliates have and currently are engaged in wireless
communications businesses, and may in the future engage in additional such
businesses, which are or may be competitive with some or all of the services
offered by Nextel's Digital Mobile networks, although the Motorola Land Mobile
Products Sector ("Motorola LMPS") may not, for three years after consummation of
the Motorola Transaction, make use (with certain limited exceptions) of the
customer lists conveyed by Motorola to ESMR in connection therewith to solicit
subscribers for any 800 MHz SMR commercial mobile voice business owned or
managed by Motorola LMPS in the continental United States. Pursuant to the
Second Equipment Agreement Amendment, Motorola has agreed that from the date
thereof until 18 months after certain development targets for Reconfigured iDEN
have been achieved, Motorola LMPS will not solicit other iDEN customers and
neither Motorola LMPS nor Motorola's credit corporation subsidiary will make any
equity investment in, or provide equipment/vendor financing to, certain iDEN
customers with respect to purchases of iDEN equipment.
In light of the competitive posture of Motorola, Nextel and Motorola have
agreed that any information relating to Nextel's business plans and projections
will be used by Motorola only for purposes of ensuring compliance with Nextel's
obligations under the various equipment purchase agreements and financing
agreements between Nextel and Motorola. Motorola has designated one director to
the Nextel Board and, hence, such director has access to Nextel's business plans
subject to certain confidentiality restrictions.
Although Nextel believes that its equipment purchase and financing
relationship with Motorola has been structured to reflect the realities of
purchasing and borrowing from a competitor, there can be no assurance that the
potential conflict of interest will not adversely affect Nextel in the future.
Moreover, Motorola's role as a significant stockholder of Nextel, in addition to
its role as a major creditor and supplier, also create potential conflicts of
interest, particularly with regard to significant transactions.
CONCERNS ABOUT MOBILE COMMUNICATIONS HEALTH RISK MAY AFFECT PROSPECTS OF NEXTEL
Allegations have been made by certain individuals that serious health risks
have resulted from the use of portable mobile communications devices. The
Cellular Telecommunications Industry Association has undertaken studies
concerning the health risk from using mobile communications devices and has
publicly announced its belief that no such risk exists. The actual or perceived
risk of mobile communications devices could adversely affect Nextel through a
reduced subscriber growth rate, a reduction in subscribers, reduced network
usage per subscriber or through reduced financing available to the mobile
communications industry.
FORWARD-LOOKING STATEMENTS
"SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT
OF 1995: A number of the matters and subject areas discussed in the foregoing
"Risk Factors" section that are not historical or current facts deal with
potential future circumstances and developments. The discussion of such matters
and subject
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areas is qualified by the inherent risks and uncertainties surrounding future
expectations generally, and also may materially differ from Nextel's actual
future experience involving any one or more of such matters and subject areas.
Nextel has attempted to identify, in context, certain of the factors that it
currently believes may cause actual future experience and results to differ from
Nextel's current expectations regarding the relevant matter or subject area. The
operation and results of Nextel's wireless communications business also may be
subject to the effect of other risks and uncertainties in addition to the
relevant qualifying factors identified elsewhere in the foregoing "Risk Factors"
section, including, but not limited to, general economic conditions in the
geographic areas and occupational market segments (such as, for example,
construction, delivery, and real estate management services) that Nextel is
targeting for its Digital Mobile network service, the availability of adequate
quantities of system infrastructure and subscriber equipment and components to
meet Nextel's service deployment and marketing plans and customer demand, the
success of efforts to improve and satisfactorily address issues relating to
Digital Mobile system performance, the successful deployment of the Reconfigured
iDEN technology, the ability to achieve market penetration and average
subscriber revenue levels sufficient to provide financial viability to the
Digital Mobile network business, access to sufficient debt or equity capital to
meet Nextel's operating and financing needs, the quality and price of similar or
comparable wireless communications services offered or to be offered by Nextel's
competitors, including providers of cellular and PCS service, future legislative
or regulatory actions relating to SMR services, other wireless communications
services or telecommunications generally and other risks and uncertainties
described from time to time in Nextel's reports filed with the Commission,
including the Annual Report on Form 10-K for the fiscal year ended December 31,
1995 and the Quarterly Reports on Form 10-Q for the quarters ended March 31,
1996, June 30, 1996 and September 30, 1996.
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THE RECAPITALIZATION
The WVB Board recommends that WVB Shareholders approve an amendment to the
WVB Charter to effect the Recapitalization, which will recapitalize WVB by
converting each outstanding share of WVB Common Stock into 81 shares of WVB
Class A Common Stock and 19 shares of WVB Class B Common Stock. The
Recapitalization is being proposed in contemplation of the Merger and the effect
will be to split WVB's equity into two classes, one of which is intended to be
acquired by Nextel upon consummation of the Merger and the other of which will
be retained by the WVB Shareholders. The form of the proposed amendment to the
WVB Charter is attached to this Proxy Statement/Prospectus as Annex B.
The proposed amendment provides that, except as required by law and except
with respect to the election of directors, the shares of WVB Class A Common
Stock and WVB Class B Common Stock will vote together as a single class, with
each share of WVB Class A Common Stock having 90/18 votes and each share of WVB
Class B Common Stock having 10/19 votes. Thus, as a class, the WVB Class A
Common Stock will have 90% of the voting power of WVB and the WVB Class B Common
Stock will have 10% of such voting power. The proposed amendment further
provides that the holders of WVB Class A Common Stock will be entitled to elect
nine directors and the holders of WVB Class B Common Stock will be entitled to
elect one director.
THE MERGER
BACKGROUND OF THE MERGER
Commencing in the fall of 1995, various members of the WVB Board and
management held intermittent meetings with various members of the Nextel Board
and management concerning the possibility of a business combination between
Nextel and WVB. In January 1996, WVB and McCaw International, Ltd., an indirect
wholly owned subsidiary of Nextel ("MIL") executed a Confidentiality Agreement,
and thereafter, WVB began providing information relevant to such prospective
transaction to Nextel and MIL. Representatives of the parties met on several
occasions during the following four months and exchanged drafts of a term sheet
for a business combination. In general, these discussions contemplated a
stock-for-stock acquisition by Nextel of a controlling interest in WVB and also
contemplated some continuing interest in WVB for the existing WVB Shareholders.
Discussions and negotiations regarding pricing and other key points continued
throughout this period. In June 1996, the parties' efforts led to an agreed-upon
term sheet for such a transaction. Nextel then proceeded with a due diligence
review of WVB that lasted until early August 1996 and draft agreements and
comments were exchanged by the parties and their respective counsels from March
1996 through early August 1996. In August 1996, Nextel and WVB terminated
discussions and negotiations with regard to any business combination between the
parties.
The parties' discussions resumed in earnest in late September 1996 through
meetings attended by senior management of Nextel, MIL and WVB. These discussions
contemplated both a stock-for-stock transaction and a continued interest in WVB
for the existing WVB Shareholders. During September 1996 and October 1996, the
parties and their representatives negotiated the terms of a definitive merger
agreement and Nextel conducted a further due diligence review with respect to
WVB. Discussions and negotiations regarding pricing and other key points
continued throughout this period. Draft agreements and comments were exchanged
by the parties and their respective counsels from late September 1996 through
October 1996. On October 14 1996 , the WVB Board met and, by unanimous vote of
the directors present, approved the Merger Agreement and recommended that the
WVB Shareholders vote in favor of the adoption of the Merger Agreement. One
director, Mr. Cardoso, was not able to attend the board meeting but he later
advised the WVB Board that he concurred with the actions taken by the WVB Board.
Following these approvals, the parties entered into the Merger Agreement on
October 28, 1996. On November 13, 1996 acting by unanimous written consent, the
entire WVB Board ratified the Merger Agreement. As of such date, the directors
of WVB and their affiliates who constitute the Principal Shareholders
beneficially owned an aggregate of 90,300 shares of WVB Common Stock or
approximately 99.95% of the shares of WVB Common Stock outstanding on such date
and were involved in the negotiations described above.
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RECOMMENDATION OF THE WVB BOARD; REASONS FOR THE MERGER
The WVB Board has unanimously approved the Merger Agreement and determined
to recommend the Merger to the WVB Shareholders.
The factors considered by the WVB Board in approving the Merger included,
among others, the following: (i) by permitting WVB Shareholders to obtain Nextel
Common Stock in exchange for a portion of their WVB Common Stock, the Merger
allows them to obtain liquidity with respect to a significant portion of their
investment in WVB while also permitting them to share in appreciation in the
value of Nextel Common Stock if such stock appreciates after the Merger; (ii) by
permitting WVB Shareholders to retain a portion of their WVB Common Stock, the
Merger allows them an opportunity to share in the increased value of WVB that
the WVB Board anticipates will result from the application of Nextel's greater
experience and resources in the operation of digital SMR systems and in
proceeding with an assumed implementation of a digital SMR system in major
metropolitan areas in Brazil; (iii) the Merger has been structured so as to
qualify as tax-free in nature; and (iv) because of the significant amount of
additional capital that would be required to implement WVB's business plan to
construct and operate digital SMR systems in Brazil and the uncertainties
associated with obtaining such capital upon attractive terms, the Merger greatly
increases the likelihood of implementation of such business plan following the
Merger. The WVB Board did not quantify or otherwise assign relative weights to
the specific factors considered in reaching its determination.
The WVB Board also considered several alternatives to the Merger, including
continuing WVB's existing efforts to raise sufficient financing to commence the
construction of the digital SMR system as well as seeking other potential
acquirors for WVB. The WVB Board determined that Nextel's proposal was superior
to other such options, which the WVB Board believed would involve an inherently
longer timeframe until benefits to the WVB Shareholders were realized.
THE WVB BOARD BELIEVES THAT THE PROPOSED MERGER IS IN THE BEST INTERESTS OF
WVB AND ITS SHAREHOLDERS AND RECOMMENDS THAT THE WVB SHAREHOLDERS VOTE FOR
APPROVAL AND ADOPTION OF THE AMENDMENTS TO WVB'S CHARTER REQUIRED TO IMPLEMENT
THE PROPOSED RECAPITALIZATION AND ALSO FOR APPROVAL AND ADOPTION OF THE MERGER
AGREEMENT.
TERMS OF THE MERGER
This section of the Proxy Statement/Prospectus describes certain aspects of
the Merger Agreement. The description does not purport to be complete and is
qualified by reference to the Merger Agreement, which is attached as Annex A
hereto and is incorporated by reference herein. All holders of WVB Common Stock
are encouraged to read the Merger Agreement.
General
Subject to the terms and conditions of the Merger Agreement, at the
Effective Time, DCI will be merged with and into WVB with WVB being the
Surviving Corporation. By reason of the Merger, DCI shall cease to exist, and
WVB, as the Surviving Corporation, shall become a majority-owned subsidiary of
Nextel, governed by the laws of the Commonwealth of Virginia, with all of the
rights and obligations of each of DCI and WVB. Following the completion of the
Merger, Nextel will own all of the outstanding shares of New Class A Common
Stock, which will represent 81% of outstanding shares and will control 90% of
the voting power of all classes of stock of WVB.
Shares of WVB Class B Common Stock will be converted in the Merger into the
same number of shares of New Class B Common Stock, which will represent 19% of
the outstanding shares and 10% of the voting power of all classes of stock of
WVB.
Effective Time of the Merger
The Closing Date will occur as soon as practicable after all of the
conditions to the consummation of the Merger have been fulfilled or, to the
extent permissible, waived. On the Closing Date, WVB and DCI shall
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cause a certificate of merger and articles of merger relating to the Merger to
be filed with the Secretary of State of the State of Delaware and the Virginia
State Corporate Commission. The Merger will occur at the time and on the date
specified in the certificate of merger and articles of merger. WVB and Nextel
anticipate that the Effective Time will occur promptly after the Special
Meeting. See "-- Conditions to the Merger."
Determination of Merger Consideration
At the Effective Time, all shares of WVB Class A Common Stock issued and
outstanding immediately prior to the Effective Time, other than shares held in
the treasury of WVB (which will be canceled) and shares as to which statutory
dissenters' rights have been exercised, and (except as described below) all WVB
Options shall be converted in the aggregate into the right to receive from the
Surviving Corporation a number of shares of Nextel Common Stock equal to (i) (x)
$186,300,000 (the purchase price being paid by Nextel) minus (y) the sum of
principal and interest due to Telcom as of the Effective Time under the WVB
Note, divided by (ii) $15.5719, the average of the closing prices of the Nextel
Common Stock on the NSM for the 20 trading days commencing on October 29, 1996
and ending on November 25, 1996 (the "Closing Average"). Such shares of Nextel
Common Stock will be distributed to holders of WVB Class A Common Stock and
(except as described below) to the WVB Optionholders on a pro rata basis based
on (a) the number of shares of WVB Class A Common Stock held by each holder of
WVB Class A Common Stock and (b) the number and value of the shares of WVB
Common Stock that the WVB Optionholders would be entitled to receive if they had
exercised their options in full in a cashless manner immediately prior to the
Closing.
In the Merger, shares of DCI will be converted into a number of shares of
New Class A Common Stock which will represent 81% of the Surviving Corporation's
outstanding shares immediately following the Merger and will control 90% of the
voting power of the Surviving Corporation. Shares of WVB Class B Common Stock
will be converted in the Merger into an identical number of shares of New Class
B Common Stock which will remain outstanding following the Merger. Following the
completion of the Merger, the New Class B Common Stock will represent 19% of the
Surviving Corporation's outstanding shares and control 10% of the voting power
of the Surviving Corporation. Except as described below, shares of WVB Class A
Common Stock and WVB Options outstanding immediately prior to the Merger will be
converted into the right to receive Nextel Common Stock, as described above.
Pursuant to the Merger Agreement, WVB has agreed, among other things, to
use its best efforts to obtain waivers from the WVB Optionholders of their
rights to receive anything other than the shares of Nextel Common Stock
specified in the Merger Agreement in respect of the WVB Options (the
"Optionholder Agreements"). To the extent that any WVB Optionholder does not
elect to enter into an Optionholder Agreement, such holder will be entitled to
receive, upon exercise of his or her WVB Option, the number of shares of Nextel
Common Stock issuable in respect of the shares of WVB Class A Common Stock
issuable pursuant to his option and the number of shares of New Class B Common
Stock issuable in respect of the shares of WVB Class B Common Stock issuable
pursuant to his option. Additionally, WVB may enter into agreements with WVB
Optionholders providing for cancellation of such options in which event the WVB
Optionholder would not be entitled to participate in the Merger.
Also at the Effective Time, the WVB Note will be exchanged for a number of
shares of Nextel Common Stock (rounded to the nearest whole share) having a
value equal to (i) the sum of principal and interest due to Telcom under the WVB
Note as of the Effective Time, divided by (ii) the Closing Average. Immediately
following the Effective Time, the WVB Note shall be deemed canceled.
Fractional Shares
In no event will any fractional share of Nextel Common Stock be issued as a
result of the Merger. In lieu of any fractional share of Nextel Common Stock to
which a holder of shares of WVB Class A Common Stock and any WVB Optionholder
would otherwise be entitled, such holder shall be entitled to receive a cash
payment equal to the product of (i) the fractional interest of a share of Nextel
Common Stock to which such holder would otherwise be entitled and (ii) the
Closing Average.
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Articles of Incorporation and Bylaws
The Merger Agreement provides that the Articles of Incorporation of WVB
shall be amended prior to the Effective Time to effect the Recapitalization as
set forth in Annex B and such Articles of Incorporation as so amended shall be
the Articles of Incorporation of the Surviving Corporation after the Effective
Time. Immediately following the Merger, the Articles of Incorporation of WVB
shall be further amended as set forth in Annex C. The Bylaws of WVB in effect
immediately prior to the Effective Time as set forth in Annex D will become the
bylaws of the Surviving Corporation.
Under WVB's Articles of Incorporation, as they are to be amended in
connection with the Merger, the holders of the New Class B Common Stock will
have the right to elect one director, and the holder or holders of the New Class
A Common Stock will have the right to elect nine directors.
After amendment immediately following the Merger, the Surviving
Corporation's Articles of Incorporation will provide that the corporation's
board of directors may not take certain specified actions without the
concurrence of the director elected by the holders of the New Class B Common
Stock (the "Class B Director"). The actions that require such consent include
(1) certain amendments to the Articles of Incorporation and Bylaws, (2) the
creation of senior equity securities or the amendment of the rights of any
existing capital stock, (3) causing the Surviving Corporation or its material
subsidiaries to issue voting securities with voting rights different from those
of then-outstanding capital stock, (4) certain mergers, asset sales and other
fundamental transactions involving the Surviving Corporation or its affiliates,
(5) causing WVB to enter into any transactions with the holder of the New Class
A Common Stock other than on an arms'-length basis, and (6) causing the
Surviving Corporation to issue securities for other than fair market value.
Pursuant to the Shareholders Agreement, if the Class B Director shall fail
to approve any such action, the Surviving Corporation shall have the right to
purchase the outstanding shares of New Class B Common Stock from the holders
thereof for a price per share equal to the per share value of the Surviving
Corporation, as determined by an independent appraiser.
Exchange of Certificates
On the Closing Date (or as soon as practicable thereafter), each holder of
a WVB Certificate (other than WVB Certificates representing shares held by WVB
or shares with respect to which statutory dissenters' rights have been
exercised) should deliver such WVB Certificate to the Surviving Corporation.
Upon surrender to the Surviving Corporation of a WVB Certificate (together with
all other required documents, if any), the former holder of the shares of WVB
Common Stock represented by such WVB Certificate shall receive (i) a certificate
or certificates representing the number of shares of New Class B Common Stock
into which such holder's shares of WVB Class B Common Stock were converted, and
(ii) a certificate representing the number of shares of Nextel Common Stock to
which such holder shall have become entitled pursuant to the Merger, determined
as described above. Each WVB Optionholder who has entered into an Optionholder
Agreement, upon delivery of the original documentation representing such
holder's WVB Option together with all required documents to the Surviving
Corporation, shall receive a certificate representing the number of shares of
Nextel Common Stock to which such holder shall have become entitled pursuant to
the Recapitalization and the Merger, determined as described above. In the event
a WVB Optionholder does not enter into an Optionholder Agreement, unless his WVB
Option has been cancelled as described above, each holder upon delivery of the
required documents will be entitled to the shares of Nextel Common Stock and New
Class B Common Stock issuable in respect thereof. The holder of the WVB Note,
upon surrender thereof, shall be entitled to receive a certificate representing
the number of shares of Nextel Common Stock to which such holder shall have
become entitled pursuant to the Merger.
WVB Shareholders whose WVB Certificates have been lost or destroyed may
nevertheless receive Nextel Common Stock to which they have become entitled
pursuant to the Merger by delivering to Nextel and the Surviving Corporation an
affidavit certifying such loss or destruction, such indemnity as Nextel and the
Surviving Corporation may reasonably require and any other necessary
documentation.
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Limitations on Transferability of Nextel Common Stock and New Class B Common
Stock
The transferability of shares of Nextel Common Stock to be received by WVB
Shareholders deemed to be "affiliates" of WVB prior to the Merger will be
limited by the provisions of Rule 145 under the Securities Act. In accordance
with Rule 145 under the Securities Act, an affiliate of WVB receiving shares of
Nextel Common Stock to be issued in the Merger may not sell such shares except
pursuant to the volume and manner of sale limitations and other requirements
specified therein or pursuant to an effective registration statement under the
Securities Act. WVB has agreed to use all reasonable efforts to cause its
affiliates, including each of its directors and executive officers and holders
of more than 5% of the outstanding shares of WVB, to enter into an agreement
with Nextel providing that such person will not sell or otherwise dispose of the
shares of Nextel Common Stock received by such person in the Merger other than
in compliance with Rule 145 or pursuant to an effective registration statement.
Should any person deemed an "affiliate" of WVB fail to enter into such
agreement, Nextel is entitled to place a legend such holder's certificates to
indicate the limitations thereon.
Holders of New Class B Common Stock will be required to enter into the
Shareholders Agreement, which restricts their ability to transfer such shares.
See "-- Shareholders Agreement."
Conditions to the Merger
The obligation of Nextel and DCI to consummate the Merger is subject to the
satisfaction at or before the Effective Time of certain conditions. Such
conditions include, but are not limited to: (i) the representations and
warranties of WVB contained in the Merger Agreement being true and correct in
all material respects as of the Effective Time, (ii) WVB having complied in all
material respects with all of its obligations under the Merger Agreement to be
complied with prior to the Effective Time (see "-- Certain Covenants"), (iii)
Nextel having received certain approvals, consents and certificates from WVB,
(iv) the proposed Recapitalization and the Merger Agreement having been approved
by holders of the requisite number of the outstanding shares of WVB Common Stock
(see "The Special Meeting -- Record Date; Vote Required"), (v) Nextel having
received the legal opinions of WVB's legal counsel as to certain matters, (vi)
there being no litigation pending that is reasonably likely to restrain or
invalidate the Merger, (vii) all material consents and approvals necessary for
consummation of the Merger having been received and the waiting period under the
HSR Act having expired or been earlier terminated, (viii) certain additional
agreements having been executed and delivered by the parties thereto, including
the Shareholders Agreement (see "-- Additional Agreements"), (ix) the
Registration Statement having become effective under the Securities Act and no
stop order suspending such effectiveness having been issued or proceedings for
that purpose having been initiated or threatened by the Commission, (x) Nextel
having received from all affiliates of WVB receiving shares of Nextel Common
Stock in the Merger a letter to the effect that such persons will not dispose of
such shares except in compliance with Rule 145 under the Securities Act, (xi)
the absence of certain changes in political and economic conditions in Brazil,
(xii) Nextel having received copies of each document with respect to the grant
of the licenses for SMR channels in Brazil, (xiii) Nextel having received
comfort with respect to the resolution of certain Brazilian regulatory issues;
(xiv) all transactions between WVB and its affiliates, on the one hand, and the
WVB Shareholders and their affiliates, on the other hand, having been
terminated; and (xv) certain agreements having been executed by the WVB
Optionholders or an agreement indemnifying Nextel and the Surviving Corporation
in respect of the WVB Options shall have been executed by the Principal
Shareholders.
The obligation of WVB to consummate the Merger is subject to the
satisfaction at or before the Effective Time of certain conditions. Such
conditions include, but are not limited to: (i) the representations and
warranties of Nextel and DCI contained in the Merger Agreement being true and
correct in all material respects as of the Effective Time, (ii) Nextel and DCI
having complied in all material respects with all of their obligations under the
Merger Agreement to be complied with prior to the Effective Time (see
"-- Certain Covenants"), (iii) WVB having received certain consents, approvals
and certificates from Nextel and DCI, (iv) the proposed Recapitalization and the
Merger Agreement having been approved by the holders of requisite number of the
outstanding shares of WVB Common Stock (see "The Special Meeting -- Record Date;
Vote Required"), (v) WVB having received the legal opinion of Nextel's legal
counsel as to certain matters, (vi) there being no litigation pending that is
reasonably likely to restrain or invalidate the Merger,
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(vii) all material consents and approvals necessary for consummation of the
Merger having been received and the waiting period under the HSR Act having
expired or been earlier terminated, (viii) certain additional agreements having
been executed and delivered by the parties thereto (see "-- Additional
Agreements"), (ix) the Registration Statement having become effective under the
Securities Act and no stop order suspending such effectiveness having been
issued or proceedings for that purpose having been initiated or threatened by
the Commission and (x) the absence of any material changes with respect to
Nextel that would be required to be disclosed publicly if Nextel were making a
public offering of securities.
Subject to certain limitations, the conditions to the obligations of the
parties to consummate the Merger may be waived by the party or parties entitled
to the benefit of such conditions. See "-- Amendment and Termination."
Certain Covenants
The Merger Agreement contains certain covenants of WVB relating to the
operations of WVB prior to the Effective Time, including, without limitation,
covenants of WVB to, except as otherwise provided in the Merger Agreement, do
the following: (i) conduct its business in the ordinary course consistent with
its past practices, (ii) comply with all applicable laws, (iii) maintain its
insurance coverage, (iv) allow Nextel access to WVB's and its subsidiaries'
properties and records, (v) take all necessary action to hold a meeting of WVB
Shareholders for the purpose of voting on approval of the Merger Agreement, (vi)
not to solicit or encourage the initiation of any proposals regarding a merger,
sale of substantially all assets, sale of capital stock or any similar
transaction involving WVB or its subsidiaries provided such obligation shall not
prevent the WVB Board from complying with its fiduciary obligations under
applicable law, (vii) use all reasonable efforts to cause its affiliates, within
the meaning of Rule 145 under the Securities Act, to provide Nextel with
undertakings to the effect that no dispositions of shares of Nextel Common Stock
received by such persons in the Merger will be made except in compliance with
Rule 145, (viii) take certain actions with respect to tax matters and regulatory
issues and (ix) use its best efforts to obtain certain waivers or agreements
from the WVB Optionholders.
Pursuant to the Merger Agreement, subject to certain conditions, Nextel has
agreed to provide reasonable assistance to the WVB Shareholders in connection
with the preparation of a resale prospectus (and related registration statement)
in connection with the proposed public offering of securities of a trust that in
certain circumstances may be redeemable in exchange for certain of the shares of
Nextel Common Stock issuable in the Merger.
The Merger Agreement also contains covenants of the parties to the Merger
Agreement to cooperate and to take all necessary action with respect to the
Registration Statement, the Special Meeting, and the consummation of the Merger
generally.
Indemnification
Pursuant to the Voting Agreements, each of the Principal Shareholders has
agreed to indemnify the Surviving Corporation for certain other losses incurred
by the Surviving Corporation. To the extent that the remaining portion of the
purchase price under any agreement to acquire equity interests is not set forth
in the closing balance sheet of WVB, the Principal Shareholders are obligated to
pay such portion. Subject to certain exceptions, if on the second anniversary of
the Closing Date the Surviving Corporation shall not have acquired directly or
indirectly at least 99% of the equity interests of any entity owning any of the
SMR licenses (the "Licenses") to the 1,700 channels described in the Merger
Agreement (the "Channels"), the Principal Shareholders will pay the Surviving
Corporation a fixed amount per SMR channel, based on the location of the channel
(either in cash or Nextel Common Stock based on the then-current market price
per share), and the Surviving Corporation shall cause the transfer of its direct
or indirect interests in the affected entity to Telcom or its designee, subject
to applicable regulatory approval, if any. The Principal Shareholders' aggregate
liabilities to the Surviving Corporation for such losses will not exceed
$25,000,000. In addition, if, on the Closing Date, any Channel is subject to
actual frequency interference that materially prejudices such Channel's use for
its intended purpose permitted under the applicable License, other than
interference that is required by applicable law or regulation to be abated
within six months after the Closing Date (so long as the application of such law
or regulation shall not have been enjoined or held invalid by a court of
competent
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jurisdiction), subject to certain exceptions, the Principal Shareholders shall
pay to the Surviving Corporation a fixed amount per Channel, based on the
location of such channel (either in cash or Nextel Common Stock, based on the
then-current market price per share), and on the date of such payment, the
Surviving Corporation shall cause the transfer all of its rights with respect to
such channel to Telcom or any Person designated by Telcom, subject to applicable
regulatory approval, if any. If such interference is required by applicable law
or regulation to be abated within six months following the Closing Date and if
such interference shall not have been abated within 18 months of the Closing
Date, the Principal Shareholders shall make the payments contemplated in the
preceding sentence at such time. If, as of the 15-month anniversary of the
Closing Date, the Surviving Corporation or any of its affiliates shall have
received notification from the Brazilian government of termination of the
License with respect to any Channel because any action had not been taken or was
not being taken, or because the entity that holds such License was not in full
compliance with all requirements of any law or regulation relating to such
license, in each case on or prior to the Closing Date, the Principal
Shareholders shall pay to the Surviving Corporation a fixed amount per Channel
based on the location of such Channel (either in cash or Nextel Common Stock
based on the then-current market price per share).
Pursuant to the Voting Agreement, each of the Principal Shareholders has
also agreed, jointly and severally, to indemnify and hold harmless, on an
after-tax basis, Nextel and its affiliates and their officers, directors,
affiliates, controlling persons, employees and agents in respect of any and all
losses, damages, costs and expenses ("Damages") incurred by such party by reason
of (a) a breach of any of the representations made by WVB in the Merger
Agreement, (b) certain liabilities relating to legal proceedings and tax
obligations arising prior to the Closing Date, (c) the breach of any covenant
contained in the Merger Agreement by WVB prior to Closing, or (d) the breach of
undertakings of WVB or the WVB Shareholders in the Merger Agreement or any
related document. The Principal Shareholders shall not be obligated to make any
payments unless the amount of Damages exceeds $500,000, after which the
Principal Shareholders shall be obligated to pay the entire amount of such
Damages, including the first $500,000, and the remedies described in the
preceding paragraph shall be the sole remedies in respect of claims of the type
described therein.
The aggregate individual liability of each Principal Shareholder under the
Merger Agreement and the Voting Agreement shall be limited to the number of
shares of Nextel Common Stock received by such Principal Shareholder at the
Closing multiplied by the Closing Average.
The Principal Shareholders also have agreed that to the extent WVB's
liabilities exceed its assets by more than $6,000,000 at the Effective Time, the
Principal Shareholders will pay Nextel such excess amount in cash or at the
option of the Principal Shareholders in Nextel Common Stock based on the then
current-market price per share. Additionally, to the extent that the remaining
portion of the purchase price under any agreement to acquire equity interests is
not set forth in the closing balance sheet of WVB, the Principal Shareholders
are obligated to pay such portion.
It is a condition to Nextel's obligation to consummate the Merger that WVB
obtain certain waivers or agreements in respect of the WVB Options or that the
Principal Shareholders have entered into an agreement indemnifying the Surviving
Corporation and Nextel for any damages and costs with respect to any claims in
respect of the WVB Options.
Nextel has agreed to indemnify and hold harmless, on an after-tax basis,
WVB and the Principal Shareholders and their officers, directors, affiliates,
controlling persons and agents for Damages suffered as a result of the breach of
representations of Nextel or DCI in the Merger Agreement or Damages suffered as
a result of undertakings of Nextel or DCI in related documents delivered to the
WVB Shareholders at or in connection with the Closing; provided that no such
payments shall be made unless the amount of Damages exceeds $500,000, after
which Nextel shall be obligated to pay the entire amount; provided further, that
Nextel's maximum liabilities shall be $186,300,000.
Amendment and Termination
The Merger Agreement may be modified or amended at any time prior to the
Closing Date by the mutual consent of Nextel, DCI and WVB by written agreement
duly executed and delivered on behalf of the parties.
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The Merger Agreement may be terminated at any time prior to the Closing
Date: (i) by the mutual written consent of Nextel and WVB by action of their
respective boards of directors; (ii) Nextel or WVB if the Merger has not been
consummated by January 29, 1997; provided that the right to terminate shall not
be available to any party whose failure to perform caused such delay or (iii) by
either Nextel or WVB if any court of competent jurisdiction or other
governmental body has entered a non-appealable order, decree or ruling or taken
any other action restraining, enjoining or otherwise prohibiting the Merger.
In addition, Nextel may terminate the Merger Agreement under certain other
circumstances, including if (i) WVB breaches any representation, warranty,
covenant or agreement so that the conditions set forth in the Merger Agreement
would not be satisfied, (ii) the WVB Board withdraws or modifies in a manner
adverse to Nextel its approval or recommendation of the Merger or resolves to
recommend an alternative transaction or a tender offer or exchange offer for 15%
or more of the outstanding capital stock of WVB, (iii) the requisite approval of
the WVB Shareholders is not obtained prior to the time set forth in clause (ii)
of the preceding paragraph, or (iv) the WVB Board determines that it is required
by its fiduciary duties to accept an unsolicited acquisition proposal more
favorable to the WVB Shareholders from a financial point of view than the
Merger.
WVB may terminate the Merger Agreement by action of the WVB Board if (i)
Nextel breaches any representation or warranty, covenant or agreement so that
the conditions in the Merger Agreement would not be satisfied (ii) the requisite
approved if the WVB Shareholders is not obtained prior to the time set forth in
clause (ii) of the second preceding paragraph or (iii) the WVB Board determines
that it is required by its fiduciary duties to accept an unsolicited acquisition
proposal more favorable to the WVB Shareholders from a financial point of view
than the Merger.
Additional Agreements
The Merger Agreement provides that, as conditions to the consummation of
the Merger, certain agreements must be entered into, including but not limited
to (i) a noncompetition agreement between Nextel and certain affiliates of WVB
pursuant to which such affiliates will agree not to compete with Nextel and the
Surviving Corporation in the paging and SMR business in Brazil and (ii) the
Shareholders Agreement described below.
SHAREHOLDERS AGREEMENT
The Shareholders Agreement, among other things, (a) imposes certain
restrictions on the ability of the former WVB Shareholders to transfer the
shares of New Class B Common Stock to be held by them following the consummation
of the Merger, (b) provides that the holder of the New Class A Common Stock
shall be subject to certain tag-along rights benefiting the holders of the New
Class B Common Stock, and shall have certain drag-along rights with respect to
such holders, (c) contains certain provisions with respect to preemptive rights,
and (d) gives the holders of New Class B Common Stock certain limited rights to
cause their shares to be registered for public sale. The following description
of certain provisions of the Shareholders Agreement is a summary and is
qualified by reference to the full text of the Shareholders Agreement, a copy of
which is attached hereto as Annex F.
Transfer Restrictions
The Shareholders Agreement provides that the holders of New Class B Common
Stock may not transfer their shares, except pursuant to a bona fide pledge
arrangement, prior to two years and 90 days after the Closing Date of the
Merger. Thereafter, if any such holder shall propose to transfer any of such
holder's shares, each other holder (other than any holder holding less than 10%
of the outstanding shares) shall have a 30-day right of first refusal.
Tag-along and Drag-along Rights
The holder of the New Class A Common Stock may not sell any of its shares
of New Class A Common Stock unless each holder of New Class B Common Stock shall
have been provided with an opportunity to sell a pro rata portion of its shares
on the same terms and to the same buyer. If the holder of New Class A
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Common Stock shall determine to sell all of its shares of such stock, it shall
have the right to require the holders of New Class B Common Stock to sell all of
their shares on the same terms.
Voting and Directors
The shareholders of the Surviving Corporation must vote in favor of one
candidate designated by the holders of New Class B Common Stock (representing no
more than 10% of the directors) (the "Class B Director") and all other
candidates designated by the holder of New Class A Common Stock. If at any time
the holders of New Class B Common Stock collectively own less than 10% of the
New Class A Common Stock and New Class B Common Stock, the Class B Director
shall resign and the holders of the New Class B Common Stock shall not have the
right to designate any candidates for election to the board of directors of the
Surviving Corporation.
Capital Calls and Preemptive Rights
The Shareholders Agreement provides that during the period ending two years
and 90 days after the Closing Date, the holders of New Class B Common Stock have
no obligation to make any pro rata capital contributions to the Surviving
Corporation. The issuance of WVB Common Stock to the holder of New Class A
Common Stock or its affiliates during this period shall not reduce the right of
the holders of New Class B Common Stock to receive dividends or other cash or
noncash distributions during such period. The holders of the New Class B Common
Stock have the option to pay a "true-up" on or prior to the last day of such
period and if such payment is not made, such holders shall sustain a
proportionate dilution of their percentage equity interest in the Surviving
Corporation and their corresponding interest in dividends and other distribution
shall be proportionally reduced. The Shareholders Agreement also provides that
shares may be sold at any time to outside unaffiliated investors at fair market
value, except that if such issuance would dilute the holdings of the holders of
New Class B Common Stock to less than 17%, the holders of New Class B Common
Stock shall have the right to participate in such offering to the extent
necessary to maintain an aggregate interest of 17%.
Registration Rights
The Shareholders Agreement provides that the holders of at least 50% of the
New Class B Common Stock will have one demand and certain piggyback registration
rights. The demand registration right may only be exercised within six months
after the Surviving Corporation has completed an initial public offering of
securities, and the shares requested to be registered must have a market value
of at least $10 million.
Repurchase Rights
If the Class B Director or the holders of the New Class B Common Stock
shall fail to approve certain actions described in the WVB Charter, as amended
in connection with the Merger, the Surviving Corporation shall have the right to
purchase the outstanding shares of New Class B Common Stock from its holders for
a price per share equal to the per share value of the Surviving Corporation, as
determined by an independent appraiser, payable in either cash or Nextel Common
Stock.
Noncompetition
Pursuant to the Shareholders Agreement (as well as the Voting Agreement in
the case of the Principal Shareholders) each holder of WVB Class B Common Stock
will agree that until one year following the termination of the Shareholders
Agreement with respect to such holder, neither such holder nor its controlled
affiliates will compete with the Surviving Corporation or its affiliates in the
business of SMR or paging in Brazil, subject to certain exemptions.
Termination
The Shareholders Agreement will terminate upon the earliest to occur of (i)
the liquidation, merger or sale of substantially all of the assets of the
Surviving Corporation, (ii) the written agreement of 97% of the
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holders of New WVB Common Stock, (iii) the closing of the initial public
offering of the Surviving Corporation's equity securities, or (iv) the
expiration of 21 years after the death of the last to die of the individual
shareholders named therein.
DISSENTERS' RIGHTS
In accordance with Article 15 of the VSCA ("Article 15"), if the proposed
Merger is approved and consummated, WVB Shareholders who neither vote for nor
consent in writing to the Merger Agreement will have the right to receive the
"fair value" of their shares of WVB Common Stock in cash (excluding any
appreciation or depreciation in anticipation of the Merger except where such
exclusion would be inequitable), as judicially determined if they fully comply
with the provisions of Article 15.
The following is a brief summary of the procedures set forth in Article 15
which are required to be followed by WVB Shareholders who wish to dissent from
the Merger and assert their statutory dissenters' rights. This summary is
qualified in its entirety by reference to Article 15, the complete text of which
is attached to this Proxy Statement/Prospectus as Annex E. WVB Shareholders who
desire to exercise dissenters' rights with respect to the Merger are advised to
seek independent counsel.
Holders of record of shares of WVB Common Stock who desire to exercise
their dissenters' rights must satisfy all of the conditions of Article 15.
Article 15 requires that a shareholder who wishes to exercise his dissenters's
rights, deliver to WVB before the vote is taken on the Merger Agreement, written
notice of the shareholder's intent to demand payment for his shares if the
proposed action is effectuated. A shareholder should mail the written notice of
intent to demand payment to WVB at: 2300 Clarendon Blvd., Suite 800, Arlington,
VA 22201, Attention: Secretary. A WVB Shareholder exercising dissenters' rights
shall not vote such shares in favor of the Merger. The written notice of intent
to assert dissenter's rights must be in addition to and separate from the
shareholder's abstention or vote, in person or by proxy, against approval of the
Merger Agreement.
NEITHER VOTING AGAINST, ABSTAINING FROM VOTING, OR FAILING TO VOTE ON THE
ADOPTION OF THE MERGER AGREEMENT WILL CONSTITUTE A DEMAND FOR PAYMENT WITHIN THE
MEANING OF ARTICLE 15.
WVB Shareholders electing to exercise their dissenters' rights under
Article 15 shall NOT vote for authorization of the Merger Agreement. ABSTAINING
from voting or voting AGAINST the approval of the Merger Agreement will not
constitute a waiver of such shareholder's dissenters' rights.
If the Merger Agreement is approved at the Special Meeting, within ten days
after the Effective Time, the Surviving Corporation shall deliver a dissenters'
notice in writing to all WVB Shareholders who satisfied the notice of intent to
demand payment requirement. The dissenters' notice shall: (i) state where the
payment demand shall be sent and where and when certificates for certificated
shares shall be deposited, (ii) inform holders of uncertificated shares to what
extent transfer of the shares will be restricted after the payment demand is
received, (iii) supply a form for demanding payment that includes the date of
the first announcement to news media or to WVB Shareholders of the terms of the
proposed Merger and requires that the person asserting dissenters' rights
certify whether or not he acquired beneficial ownership of the shares before or
after that date and (iv) set a date by which the Surviving Corporation must
receive the payment demand, which date may not be fewer than thirty nor more
than sixty days after the date of delivery of the dissenters' notice. The
dissenters' notice shall be accompanied by a copy of Article 15.
A WVB Shareholder who intends to assert his dissenters' rights, and who
receives a dissenters' notice shall make a demand for payment in the form
described in the dissenters's notice. The payment demand must certify that the
shareholder acquired beneficial ownership of the shares before or after the date
required to be set forth in the dissenters' notice and in the case of
certificated shares, deposit his certificates in accordance with the terms of
the notice. Such shareholder should mail his or her demand for payment to WVB
at: 2300 Clarendon Blvd., Suite 800, Arlington, VA 22201, Attention: Secretary.
The demand for payment should specify the record holder's name and mailing
address, the number and type of shares of WVB Common Stock owned, and that such
holder is thereby demanding payment of his or her shares. A holder of
certificated shares
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must deposit his certificates in accordance with the terms of the notice. A
shareholder who deposits his or her shares retains all other rights of a
shareholder except to the extent that these rights are canceled or modified by
the approval of the Merger. A shareholder who either does not demand payment by
the date set forth in the dissenters' notice, or who does not demand payment and
deposits his or her share certificates where required, each by the date set in
the dissenters' notice, is not entitled to payment for his or her shares under
Article 15.
Within thirty days after receipt of a payment demand, the Surviving
Corporation shall pay each dissenter (except with regard to a holder of
after-acquired shares), the amount the corporation estimates to be the fair
value of each dissenter's shares, plus accrued interest. The payment shall be
accompanied by WVB's balance sheet as of the end of the fiscal year ending not
more than sixteen months before the effective date of the Merger, an income
statement for that year, a statement of changes in shareholders' equity for that
year, and the latest available interim financial statements, if any. The payment
must also be accompanied by an explanation of how the Surviving Corporation
estimated the fair value of the shares and of how the interest was calculated, a
statement of the dissenters' right to demand payment, and a copy of Article 15.
The Surviving Corporation may, in its discretion, elect to withhold payment
from a dissenter if such dissenter became beneficial owner of the shares after
the date, as set forth in the dissenters' notice, of the first publication by
news media or the first announcement to shareholders generally, whichever is
earlier, of the terms of the proposed Merger. To the extent the Surviving
Corporation elects to withhold payment, it shall estimate the fair value of the
shares, plus accrued interest, and shall offer to pay this amount to each
dissenter who agrees to accept it in full satisfaction of such dissenter's
demand. The Surviving Corporation will send with its offer an explanation of how
it estimated the fair value of the shares and of how the interest was
calculated, and a statement of the dissenter's right to demand payment.
If a dissenter is dissatisfied with the payment or offer received for such
dissenter's shares of WVB, such dissenter may notify the Surviving Corporation
in writing of his own estimate of the fair value of such dissenter's shares and
amount of interest due, and demand payment of such dissenter's estimate (less
any payment made by the Surviving Corporation under Article 15), or reject the
Surviving Corporation's offer under and demand payment of the fair value of such
dissenter's shares and interest due, if the dissenter believes that the amount
paid or offered is less than the fair value of such dissenter's shares or that
the interest due is incorrectly calculated. A dissenter shall waive the right to
demand payment under this section unless such dissenter notifies the corporation
of his demand in writing within thirty days after the Surviving Corporation
makes or offers payment for such dissenter's shares.
If a demand for payment under Article 15 remains unsettled, within 60 days
after receipt of the demand for payment, the Surviving Corporation shall
commence a proceeding and petition the circuit court to determine the fair value
of the shares and accrued interest. If the Surviving Corporation does not
commence the proceeding within the 60-day period, it shall pay each dissenter
whose demand remains unsettled the amount demanded. In the event that the
Surviving Corporation does file such a petition, it shall make all dissenters
whose demands remain unsettled parties to the proceeding as in an action against
their shares, and all parties shall be served with a copy of the petition.
Nonresidents may be served by registered or certified mail or by publication as
provided by law. The Surviving Corporation may join as a party to the proceeding
any shareholder who claims to be a dissenter but who has not, in the opinion of
the Surviving Corporation, complied with the provisions of Article 15. If the
court determines that such shareholder has not complied with the provisions of
Article 15, such shareholder shall be dismissed as a party.
The jurisdiction of the court in which the proceeding is commenced is
plenary and exclusive. The court may appoint one or more persons as appraisers
to receive evidence and recommend a decision on the question of fair value. The
appraisers have the powers described in the order appointing them, or in any
amendment to it. The dissenters are entitled to the same discovery rights as
parties in other civil proceedings.
Each dissenter made a party to the proceeding is entitled to judgment (i)
for the amount, if any, by which the court finds the fair value of such
dissenter's shares, plus interest, exceeds the amount paid by the Surviving
Corporation or (ii) for the fair value, plus accrued interest, of such
dissenter's after-acquired shares for which the Surviving Corporation elected to
withhold payment under Article 15. Fair value is defined by Article 15 as
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the value of the shares immediately before the effectuation of the Merger to
which the dissenter objects, excluding any appreciation or depreciation in
anticipation of the Merger unless exclusion would be equitable.
HOLDERS OF SHARES OF WVB COMMON STOCK CONSIDERING SEEKING APPRAISAL SHOULD
KEEP IN MIND THAT THE FAIR VALUE OF THEIR SHARES OF WVB COMMON STOCK DETERMINED
UNDER ARTICLE 15 COULD BE MORE, THE SAME, OR LESS THAN THE MERGER CONSIDERATION
THEY ARE TO RECEIVE PURSUANT TO THE MERGER AGREEMENT IF THEY DO NOT SEEK
APPRAISAL OF THEIR SHARES.
The court in an appraisal proceeding commenced under Article 15 shall
determine all costs of the proceeding, including the reasonable compensation and
expenses of appraisers appointed by the court. The court shall assess the costs
against WVB, except that the court may assess costs against all or some of the
dissenters, in amounts the court finds equitable, to the extent the court finds
the dissenters did not act in good faith in demanding payment under Article 15.
The court may also assess the reasonable fees and expenses of experts, excluding
those of counsel, for the respective parties, in amounts the court finds
equitable: (i) against the Surviving Corporation and in favor of any or all
dissenters if the court finds the Surviving Corporation did not substantially
comply with the requirements of Article 15; or (ii) against either the Surviving
Corporation or a dissenter, in favor of any other party, if the court finds that
the party against whom the fees and expenses are assessed did not act in good
faith with respect to the rights provided by Article 15.
If the court finds the services of counsel for any dissenter were of
substantial benefit to other dissenters similarly situated, the court may award
to these counsel reasonable fees to be paid out of the amounts awarded the
dissenters who were benefited. The court shall assess the costs against the
Surviving Corporation, except that the court may assess costs against all or
some of the dissenters who are parties to the proceeding, in amounts the court
finds equitable, to the extent the court finds that such parties did not act in
good faith in instituting the proceeding.
Any holder of shares of WVB Common Stock who has duly demanded payment in
compliance with Article 15 will not, after the Effective Time of the Merger, be
entitled to vote for any purpose the shares of WVB Common Stock subject to such
demand or to receive payment of dividends or other distributions on such shares,
except for dividends or distributions payable to holders of shares of WVB Common
Stock of record at a date prior to the Effective Time of the Merger.
At any time within 60 days after the Merger, any holder of shares of WVB
Common Stock who has demanded payment of the fair value thereof has the right to
withdraw a demand for appraisal and to accept the terms offered in the Merger;
after this period, such shareholder may withdraw such demand for appraisal only
with the consent of the Surviving Corporation.
THE SUMMARY SET FORTH ABOVE DOES NOT PURPORT TO BE A COMPLETE STATEMENT OF
THE PROVISIONS OF THE VSCA RELATING TO THE RIGHTS OF DISSENTING HOLDERS OF
SHARES OF WVB COMMON STOCK AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE
APPLICABLE SECTIONS OF THE VSCA, WHICH ARE INCLUDED AS ANNEX E TO THIS PROXY
STATEMENT/PROSPECTUS. HOLDERS OF SHARES OF WVB COMMON STOCK INTENDING TO
EXERCISE THEIR DISSENTERS' RIGHTS ARE URGED TO REVIEW CAREFULLY ANNEX E AND TO
CONSULT WITH LEGAL COUNSEL SO AS TO BE IN STRICT COMPLIANCE THEREWITH.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of certain Federal income tax considerations
applicable to holders of WVB Common Stock in their capacities as such. The
summary is based upon the provisions of the Code, applicable Treasury
Regulations thereunder, judicial decisions, and current administrative rulings.
The discussion does not address all aspects of Federal income taxation that may
be important to particular taxpayers or to taxpayers subject to special
treatment under the Federal income tax law, and the summary does not address any
aspect of state, local, or foreign taxation. The summary assumes that (i) as set
forth in the Merger Agreement, certain post-Merger transactions concerning the
stock of WVB and the WVB assets will not
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occur, (ii) the WVB Shareholders will satisfy the post-Merger "continuity of
shareholder interest" requirement for a tax-free reorganization, and (iii) the
shares of WVB Class A Common Stock are held by the holders as capital assets. No
private letter ruling has been or will be sought from the Internal Revenue
Service (the "IRS") regarding the federal income tax treatment of the Merger as
concerns any of Nextel, WVB, DCI or the WVB Shareholders and none of Nextel, WVB
or DCI shall have any liability to any of the WVB Shareholders if the intended
federal income tax consequences of the Merger are not achieved or if parallel
tax treatment is not extended under state, local or other applicable tax laws.
There is no assurance that the IRS will not take the position that the WVB
shareholders' exchange of WVB Class A Common Stock for Nextel Common Stock is a
taxable exchange, and there is no assurance that future legislation,
regulations, administrative rulings, or court decisions will not adversely
affect the accuracy of the statements contained herein.
Recapitalization of WVB. A holder of WVB Common Stock should recognize no
gain or loss upon the exchange of such stock for WVB Class A Common Stock and
WVB Class B Common Stock pursuant to the Recapitalization. The tax basis of each
shareholder's WVB Common Stock immediately prior to the Recapitalization should
be allocated between the WVB Class A Common Stock and the WVB Class B Common
Stock received in the Recapitalization in proportion to their relative fair
market values. The holding period of the WVB Class A Common Stock and the WVB
Class B Common Stock should include the holding period of the WVB Common Stock
surrendered in the Recapitalization.
Exchange of WVB Class A Common Stock for Nextel Common Stock. A holder of
WVB Class A Common Stock who exchanges such stock for Nextel Common Stock
pursuant to the Merger should recognize no gain or loss on the exchange. The tax
basis of the Nextel Common Stock received by such holder should be equal to the
tax basis of the WVB Class A Common Stock surrendered for such stock, and the
holding period of the Nextel Common Stock should include the holding period of
the WVB Class A Common Stock surrendered therefor.
Cash in Lieu of Fractional Shares. A holder of WVB Class A Common Stock
who receives cash in lieu of fractional shares of Nextel Common Stock should be
treated as having received such fractional shares pursuant to the Merger and
then as having exchanged such fractional shares for cash in a redemption by
Nextel. Any gain or loss attributable to fractional shares generally should be
capital gain or loss. The amount of such gain or loss should be equal to the
difference between the ratable portion of the tax basis of the WVB Class A
Common Stock surrendered in the Merger that is allocated to such fractional
shares and the cash received in lieu thereof. Any such capital gain or loss
would constitute long-term capital gain or loss if the WVB Common Stock has been
held by the holder for more than one year at the Effective Time.
Reporting Requirements. Each holder of WVB Common Stock who receives WVB
Class A Common Stock and WVB Class B Common Stock pursuant to the
Recapitalization and each holder of WVB Class A Common Stock that receives
Nextel Common Stock in the Merger will be required to retain records and file
with such holder's Federal income tax return a statement setting forth certain
facts relating to the Recapitalization and the Merger.
THIS FEDERAL INCOME TAX DISCUSSION IS FOR GENERAL INFORMATION ONLY. ALL
HOLDERS OF WVB COMMON STOCK ARE URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO
THE SPECIFIC TAX CONSEQUENCES OF THE MERGER.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
As of the Record Date, the directors of WVB and their affiliates owned
beneficially an aggregate of 90,300 shares of WVB Common Stock or approximately
99.95% of the shares of WVB Common Stock outstanding on such date. See
"Background of the Merger." For a description of certain relationships between
affiliates of WVB and Nextel, see "Material Contracts and Other Relationships
Between Nextel and WVB and Their Respective Affiliates."
Concurrently with the execution of the Merger Agreement, the Principal
Shareholders entered into the Voting Agreement pursuant to which, among other
things, each such shareholder agreed to (i) attend the
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Special Meeting and vote all shares of WVB Common Stock that such shareholder
has the right to vote in favor of the Recapitalization and the Merger and (ii)
appoint Nextel as such shareholder's proxy to vote or give consents with respect
to the WVB Common Stock held by such shareholder in favor of the approval of the
Recapitalization and the Merger Agreement.
In considering the recommendations of the Board of Directors of WVB with
respect to the Merger, shareholders should be aware that certain members of
WVB's management and Board of Directors may have certain interests in the Merger
that are in addition to their interests as shareholders of WVB. The Board of
Directors of WVB considered these interests, among other matters, in approving
the Merger Agreement and the transactions contemplated thereby. Following
consummation of the Merger, the Board of the Surviving Corporation will consist
of no more than 10 persons. Holders of the New Class A Common Stock will have
the right, as a class, to elect up to nine directors, and the holders of the New
Class B Common Stock will have the right, as a class, to elect one director. It
is anticipated that the director elected by the holders of New Class A Common
Stock will be a member of the current Board of Directors of WVB.
ACCOUNTING TREATMENT
The Merger will be accounted for as a purchase under generally accepted
accounting principles.
REGULATORY APPROVALS
The Merger is subject to the notification requirements of the HSR Act, and
the consummation of the Merger is subject to the expiration or early termination
of the waiting period under the HSR Act. Nextel and WVB filed the required
information and material with respect to the Merger under the HSR Act on
November 15, 1996 and on November 26, 1996, each was notified of the early
termination of the waiting period under the HSR Act.
CERTAIN DIFFERENCES IN RIGHTS OF SHAREHOLDERS
Introduction
WVB and Nextel are incorporated under the laws of Virginia and Delaware,
respectively. The holders of shares of WVB Common Stock, whose rights as
stockholders are currently governed by Virginia law, the WVB Charter and the WVB
By-laws, will, upon the exchange of their shares pursuant to the Merger, become
holders of shares of Nextel Common Stock, and their rights as such will be
governed by Delaware law, the Nextel Charter and the by-laws of Nextel (the
"Nextel By-laws"). Summarized below are the material differences between the
rights of holders of shares of WVB Common Stock and the rights of holders of
shares of Nextel Common Stock resulting from differences in Virginia and
Delaware law and in their governing documents. Holders of the WVB Class B Common
Stock will hold shares of New Class B Common Stock after the Merger and,
accordingly, such holders' rights will continue to be governed by the Virginia
law, the WVB Charter, as amended (the "Amended WVB Charter"), and the WVB
Bylaws. Certain provisions of the WVB Charter will be amended at the Effective
Time of the Merger, and certain of the amendments are summarized below.
Nextel and holders of shares of its capital stock have entered into certain
agreements that may affect the rights of holders of shares of Nextel Common
Stock under its charter documents and Delaware law. Pursuant to such agreements,
certain significant holders have under certain circumstances certain rights to
designate nominees to be elected to the Nextel Board. See "-- Election of Board
of Directors." In addition, the equity securities issued to the McCaw Investor
in the McCaw Transaction, and the agreements relating to such transaction, grant
to the McCaw Investor certain rights generally relating to corporate governance
topics, including rights to designate a number of directors to the Nextel Board
and rights of such directors to representation on the Operations Committee of
the Nextel Board. See "-- Terms of Nextel Preferred Stock."
The following summary does not purport to be a complete statement of the
rights of holders of shares of Nextel Common Stock under applicable Delaware
law, the Nextel Charter and the Nextel By-laws or a comprehensive comparison
with the rights of the holders of shares of WVB Common Stock under Virginia
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law, the WVB Charter and the WVB By-laws, or a complete description of the
specific provisions referred to herein. This summary is qualified in its
entirety by reference to the VSCA, the DGCL and the governing corporate
instruments of Nextel and WVB, to which holders of shares of WVB Common Stock
are referred.
References to WVB in this section refer to WVB prior to the Merger and WVB
as the Surviving Corporation after the Merger, as the context requires.
Authorized Capital Stock
Both the VSCA and the DGCL require that a corporation's certificate of
incorporation set forth the total number of shares of all classes of stock which
the corporation has authority to issue and a statement of the designations and
the powers, preferences and rights, and the qualifications, limitations or
restrictions thereof. The WVB Charter provides that WVB has authority to issue
1,000,000 shares of WVB Common Stock. After the Recapitalization, the WVB
Charter will provide that WVB shall have two classes of common stock, the WVB
Class A Common Stock and the WVB Class B Common Stock. After the Merger, the
total number of shares that WVB shall have authority to issue will be 45,000,000
shares of New Class A Common Stock and 5,000,000 shares of New Class B Common
Stock. The Nextel Charter provides that Nextel has authority to issue
613,883,948 shares of capital stock divided into six classes as follows: (i)
515,000,000 shares of Nextel Common Stock, (ii) 35,000,000 shares of Nextel
Class B Non-Voting Common Stock, par value $0.001 per share (the "Nextel Class B
Common Stock"), (iii) 26,941,933 shares of Class A Convertible Redeemable
Preferred Stock ("Nextel Class A Preferred Stock"), (iv) 82 shares of Class B
Convertible Preferred Stock ("Nextel Class B Preferred Stock"), (v) 26,941,933
shares of Class C Convertible Redeemable Preferred Stock ("Nextel Class C
Preferred Stock") and (vi) 10,000,000 shares of Preferred Stock, par value $.01
per share (the "Nextel Undesignated Preferred Stock"). The rights, preferences,
privileges and restrictions of the Nextel Class A Preferred Stock, Nextel Class
B Preferred Stock and Nextel Class C Preferred Stock are summarized in "Terms of
Nextel Preferred Stock."
Board or Stockholder Approved Preferred Stock
The DGCL permits a corporation's certificate of incorporation to allow its
board of directors to issue, without stockholder approval, series of preferred
or preference stock and to designate their rights, preferences, privileges and
restrictions; the VSCA provides essentially the same thing. The Nextel Charter
grants such power to the Nextel Board with respect to the Nextel Undesignated
Preferred Stock and there are at present no shares of such Nextel Undesignated
Preferred Stock outstanding or subject to any issuance commitment. The WVB
Charter does not authorize the issuance of preferred stock.
Terms of Nextel Preferred Stock
Pursuant to the terms of the McCaw Securities Purchase Agreement, Nextel
issued to the McCaw Investor 8,163,265 shares of Nextel Class A Preferred Stock,
each with a stated value of $36.75 per share, which shares are convertible into
an equal number of shares of Nextel Class C Preferred Stock (such shares of
Nextel Class A Preferred Stock and any shares of Nextel Class C Preferred Stock
issued upon conversion being convertible into approximately 24,500,000 shares of
Nextel Common Stock in the aggregate), and 82 shares of Nextel Class B Preferred
Stock, convertible into an equal number of shares of Nextel Common Stock.
Certain of the significant terms of each class of preferred stock are summarized
below.
Nextel Class A Preferred Stock. The Nextel Class A Preferred Stock is the
primary mechanism for providing the McCaw Investor with the economic benefits
and corporate governance rights contemplated by the McCaw Securities Purchase
Agreement. Holders of Nextel Class A Preferred Stock, voting separately as a
class, are entitled to elect three members of the Nextel Board or, if greater
than three, that number of directors (rounded up to the nearest whole number)
equal to 25% of the entire Nextel Board (the "Class A Directors"), subject to
the termination of such rights if the McCaw Investors's equity interest in
Nextel falls below specified levels. For so long as the Operations Committee is
in existence, a majority of the members of the Operations Committee will be
Class A Directors or directors designated by the McCaw Investor pursuant to the
terms of the Nextel Class B Preferred Stock or the McCaw Securities Purchase
Agreement. With
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respect to matters other than the election of directors, shares of Nextel Class
A Preferred Stock vote together as a class with shares of Nextel Common Stock
and each such share of Nextel Class A Preferred Stock is entitled to a number of
votes equal to the number of shares of Nextel Common Stock into which such share
is convertible.
Each share of Nextel Class A Preferred Stock is convertible at the election
of the holder thereof into three shares of Nextel Common Stock, subject to
certain adjustments. Upon the occurrence of certain events, the shares of Nextel
Class A Preferred Stock are automatically converted into shares of Nextel Common
Stock. In addition, shares of Nextel Class A Preferred Stock are automatically
converted into shares of Nextel Class C Preferred Stock on a one-for-one basis
upon the occurrence of certain events including certain reductions in the McCaw
Investor's ownership interest below specified levels and foreclosure by a
secured party upon shares of Nextel Class A Preferred Stock pledged to such
secured party. Shares of Nextel Class A Preferred Stock are also redeemable at
the option of Nextel upon the occurrence of certain events constituting a Change
in Control (as defined in the terms of the Nextel Charter creating and
authorizing issuance of the Nextel Class A Preferred Stock) at a redemption
price equal to the stated value of the Nextel Class A Preferred Stock plus the
amount of any accrued or declared but unpaid dividends thereon.
The Operations Committee consists of five members, three of whom are
entitled to be selected from among the McCaw Investor's representatives on the
Nextel Board as described above. The Operations Committee has the authority to
formulate key aspects of Nextel's business strategy, including decisions
relating to the technology used by Nextel (subject to existing equipment
purchase agreements), acquisitions, the creation and approval of operating and
capital budgets and marketing and strategic plans, approval of financing plans,
endorsement of nominees to the Nextel Board and nomination and oversight of
certain executive officers. The Nextel Board, by a majority vote, may override
actions taken or proposed by the Operations Committee, although doing so would
give rise to a $25,000,000 liquidated damages payment to the McCaw Investor, the
commencement of accrual of a 12% dividend payable on the stated value of all
outstanding shares of Nextel Class A Preferred Stock (an aggregate stated value
of approximately $300,000,000) and the immediate vesting of the options granted
pursuant to the McCaw Incentive Option Agreement. However, the Nextel Board, by
a defined super-majority vote, retains the power to override actions taken or
proposed by the Operations Committee without triggering the obligation to make a
liquidated damages payment, or to commence dividend accruals with respect to the
Nextel Class A Preferred Stock or to accelerate the vesting of the options
granted pursuant to the McCaw Incentive Option Agreement. In addition, the
Nextel Board also may act to terminate the Operations Committee, although such
action by the Nextel Board would, in certain circumstances, result in the
obligation to make such a liquidated damages payment and result in the
commencement of such dividend accrual and the accelerated vesting of the related
options. The McCaw Securities Purchase Agreement, the Nextel Charter and the
Nextel By-laws also delineate a number of circumstances, chiefly involving or
resulting from certain events with respect to the McCaw Investor or Mr. McCaw,
in which the Operations Committee could be terminated but such liquidated
damages payment, dividend accrual and vesting of options would not be required.
Except for the accrual of the 12% dividend in the circumstances described above,
shares of Nextel Class A Preferred Stock are entitled to dividends only to the
extent declared or paid with respect to Nextel Common Stock in amounts equal to
the amounts that would be received had the Nextel Class A Preferred Stock been
converted into Nextel Common Stock. Upon liquidation, dissolution or winding-up
of Nextel, the holders of Nextel Class A Preferred Stock are entitled to receive
a liquidation preference equal to the stated value of the Nextel Class A
Preferred Stock plus any accrued but unpaid dividends thereon.
Nextel Class B Preferred Stock. The purpose of the Nextel Class B
Preferred Stock is to provide a protection for the McCaw Investor's right to
proportionate representation on the Nextel Board (to the extent not provided by
the McCaw Investor's ownership of Nextel Class A Preferred Stock) and to
establish a mechanism for the payment of the liquidated damages payment
contemplated by the McCaw Securities Purchase Agreement in the event that the
Nextel Board takes certain actions with respect to the Operations Committee that
give rise to such payment. Shares of Class B Preferred Stock are automatically
converted on a one-for-one basis to shares of Nextel Common Stock if the McCaw
Investor's equity interest in Nextel falls below specified levels or if certain
transfers of Nextel Class B Preferred Stock occur.
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Nextel Class C Preferred Stock. The purpose of the Nextel Class C
Preferred Stock is to protect the economic attributes of the Nextel Class A
Preferred Stock in the event that certain events resulting in the termination of
the corporate governance rights associated with the Nextel Class A Preferred
Stock occur. The terms of the Nextel Class C Preferred Stock are substantially
the same as the terms of the Nextel Class A Preferred Stock except that holders
of Nextel Class C Preferred Stock have no special voting rights in the election
of directors (including the appointment of directors to the Operations
Committee) and are not entitled to the 12% dividend in the circumstances in
which shares of Nextel Class A Preferred Stock would be entitled to such
dividend.
Redemption of WVB Class B Common Stock.
After the Merger, at any time after October 31, 2001 and prior to November
1, 2003, or at any time after a Change of Control (as defined in the Amended WVB
Charter) shall have occurred, the holder or holders of a majority of the
then-outstanding shares of New Class B Common Stock may deliver a request for
redemption to WVB, and upon receipt of such request, WVB shall be required to
redeem all outstanding shares of New Class B Common Stock. Upon receipt of such
notice, WVB shall redeem all outstanding shares of New Class B Common Stock for
a price (the "Redemption Price") equal to the Appraised Fair Market Value (as
defined in the WVB Charter, as amended after the Merger) of such stock as of the
exercise date, multiplied by a fraction, the numerator of which is the number of
shares of New Class B Common Stock outstanding and the denominator of which is
the aggregate number of shares of New Class A Common Stock and New Class B
Common Stock (calculated on a fully-diluted basis at the stated exercise price
of all options) then outstanding. The Redemption Price shall, at WVB's election,
be payable in cash, publicly-traded common stock of any entity owning not less
than 50% of the outstanding shares of WVB or any combination thereof.
Voting Rights
Both the VSCA and the DGCL state that, unless a corporation's certificate
of incorporation or by-laws specifies otherwise, (i) each share of its capital
stock is entitled to one vote, (ii) a majority of voting power of the shares
entitled to vote, present in person or represented by proxy, shall constitute a
quorum at a stockholders meeting and (iii) in all matters other than the
election of directors, the affirmative vote of the majority of the voting power
of shares, present in person or represented by proxy at the meeting and entitled
to vote on the subject matter, shall be the act of the stockholders.
The WVB Bylaws provide that each shareholder of record shall be entitled to
one vote for each share of capital stock registered in such holder's name and
that the holders of at least a majority of the shares of capital stock entitled
to vote must be present in person or by proxy to constitute a quorum. The WVB
Bylaws also provide that all matters shall be determined by a majority of the
shares voting on such matters. After the Merger, on all matters other than the
election of directors, and except as required by law, the shares of New Class A
Common Stock and New Class B Common Stock shall vote together as a single class,
with each share of New Class A Common Stock having 90/81 votes per share and
each share of New Class B Common Stock having 10/19 votes per share.
As described in "-- Terms of Nextel Preferred Stock," holders of shares of
Nextel Class A Preferred Stock and Nextel Class B Preferred Stock issued in the
McCaw Transaction are entitled to designate a number of directors to the Nextel
Board.
Except as required by law with respect to shares of each of Nextel Class A
Preferred Stock, Nextel Class B Preferred Stock and Nextel Class C Preferred
Stock, and except with respect to matters as to which shares of Nextel Class A
Preferred Stock and Nextel Class B Preferred Stock will vote separately as a
class, the holders of shares of Nextel Common Stock are entitled to one vote per
share on all matters to be voted on by the stockholders of Nextel. The holders
of shares of Nextel Class B Common Stock have no right to vote on any matters to
be voted on by the stockholders of Nextel, except that the holders of shares of
Nextel Class B Common Stock have the right to vote as a separate class (with
each share having one vote) on any merger, consolidation, reorganization or
reclassification of Nextel or its shares of capital stock, any
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amendment to the Nextel Charter or any liquidation, dissolution or winding up of
Nextel (each such event being a "Fundamental Change"), but only in which shares
of Nextel Class B Common Stock would be treated differently than shares of
Nextel Common Stock. Holders of Nextel Class B Common Stock are not entitled to
such a class vote with regard to a Fundamental Change in which the only
difference in such treatment is that the holders of shares of Nextel Common
Stock would be entitled to receive equity securities with full voting rights and
the holders of shares of Nextel Class B Common Stock would be entitled to
receive equity securities which have voting rights substantially identical to
the voting rights of shares of Nextel Class B Common Stock and which are
convertible upon any Voting Conversion Event (as defined below), on a share for
share basis, into the voting securities to which the holders of the shares of
Nextel Common Stock are entitled, but which are otherwise identical to such
voting securities.
Shares of Nextel Class B Common Stock can be converted into shares of
Nextel Common Stock if such shares are being or have been distributed, disposed
of or sold (or are expected to be distributed, disposed of or sold) in
connection with a Voting Conversion Event. A "Voting Conversion Event" is
defined as (i) any public offering or public sale of securities of Nextel
(including a public offering registered under the Securities Act and a public
sale pursuant to Rule 144 or any similar rule then in force), (ii) any sale of
securities of Nextel to a person or group of persons (as used here and
subsequently in this paragraph, within the meaning of the Exchange Act) if,
after such sale, such person or group of persons in the aggregate would own or
control securities which possess in the aggregate the ordinary voting power to
elect a majority of the members of the Nextel Board if such sale had been
approved by the Nextel Board or a committee thereof, (iii) any sale of
securities of Nextel to a person or group of persons if, after such sale, such
person or group of persons in the aggregate would own or control securities of
Nextel (excluding any shares of Nextel Class B Common Stock being converted and
disposed of in connection with such Voting Conversion Event) that possess in the
aggregate the ordinary voting power to elect a majority of the members of the
Nextel Board, (iv) any sale of securities of Nextel to a person or group of
persons if, after such sale, such person or group of persons would not, in the
aggregate, own, control or have the right to acquire more than two percent (2%)
of the outstanding securities of any class of voting securities of Nextel and
(v) any distribution, disposition or sale of any securities of Nextel to a
person or group of persons in connection with a merger, consolidation or similar
transaction if, after such transaction, such person or group of persons would
own or control securities which constitute in the aggregate the ordinary voting
power to elect a majority of the surviving corporation's directors, provided the
transaction had been approved by the Nextel Board or a committee thereof. If any
shares of Nextel Class B Common Stock are converted into shares of Nextel Common
Stock in connection with a Voting Conversion Event and any such shares of Nextel
Common Stock are not actually distributed, disposed of or sold pursuant to such
Voting Conversion Event, such shares of Nextel Common Stock that were not so
distributed, disposed of or sold shall be promptly converted back into the same
number of shares of Nextel Class B Common Stock.
Number of Directors
Under the VSCA and the DGCL, unless a corporation's certificate of
incorporation specifies the number of directors, such number shall be fixed by,
or in the manner provided in, its by-laws. In both the VSCA and the DGCL, if a
corporation's certificate of incorporation expressly authorizes its board of
directors to amend its by-laws, its board of directors may change the authorized
number of directors by an amendment to the corporation's by-laws, if fixed
therein, or in such manner as is provided therein. If such certificate of
incorporation specifies the number of directors, the number of directors can
only be changed by amending the certificate of incorporation.
The WVB Bylaws provide that the WVB Board shall be a single class and that
the number of directors shall be fixed by the WVB Board, provided that there
shall be at least one but not more than ten. The limit on the maximum number of
directors may be altered only by an amendment to the WVB Bylaws that has been
approved by the holders of a majority of the shares of the WVB Common Stock.
The Nextel By-laws provide that the number of members of the Nextel Board
shall be established from time to time by resolution of the Nextel Board or by
the stockholders. Nextel is a party to certain agreements with certain of its
stockholders that entitle specified stockholders to name certain nominees to be
elected to
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the Nextel Board and might require Nextel to increase the size of the Nextel
Board. Pursuant to the terms of the McCaw Securities Purchase Agreement, Nextel
cannot increase the size of the Nextel Board to be greater than sixteen (16)
members.
The number of directors on the WVB Board is currently four and on the
Nextel Board is currently ten.
Election of Board of Directors
The VSCA and the DGCL provide that a corporation's directors shall be
elected by a plurality of the votes of the shares present in person or
represented by proxy at a meeting and entitled to vote on the election of
directors. The Nextel Charter provides that shares of Nextel Class A Preferred
Stock and Nextel Class B Preferred Stock have certain rights to vote separately
as a class to elect members of the Nextel Board. See "-- Terms of Nextel
Preferred Stock." Under the VSCA and the DGCL, stockholders of a corporation
cannot elect directors by cumulative voting unless the corporation's certificate
of incorporation so provides. Neither the Nextel Charter not the WVB Charter
provides for cumulative voting. See "-- Voting Rights."
Nextel has entered into agreements with certain stockholders that permit
such stockholders to designate nominees to be elected to the Nextel Board and
certain employment agreements with its key executives that contemplate the
election of such executives to the Nextel Board. Pursuant to the Stock Purchase
Agreement, dated as of December 9, 1991, by and between Nextel and Matsushita
(the "Matsushita Stock Purchase Agreement"), Nextel agreed that Matsushita would
be entitled to designate one member of the Nextel Board if at the time of such
appointment Matsushita or its affiliates own more than 1,500,000 shares of
Nextel Common Stock. In addition, although Comcast currently has no
representatives on the Nextel Board, the Comcast Stock Purchase Agreement
provides that, based on the commitments of the Comcast group to acquire shares
of Nextel Common Stock as contemplated therein, Comcast FCI is entitled to
designate up to two individuals to become members of the Nextel Board.
Furthermore, Comcast FCI will be entitled to designate additional members of the
Nextel Board so that the number of designees by the Comcast group taken as a
percentage of the Nextel Board is at least equal to Comcast's percentage
ownership interest in Nextel, but if at any time such percentage of the Comcast
group is less than 8%, Comcast shall be entitled to designate only one member of
the Nextel Board. Pursuant to the Stockholders' Voting Agreement, entered into
as of September 14, 1992, by and among Comcast FCI and certain stockholders of
Nextel (including Messrs. O'Brien, McAuley and Cooper), such stockholders agreed
to vote all of their respective shares of Nextel Common Stock and other voting
securities of Nextel in favor of each person designated by Comcast FCI to be a
Nextel Board member pursuant to the Comcast Stock Purchase Agreement. Each of
the Matsushita Stock Purchase Agreement, the Comcast Stock Purchase Agreement
and the Stock Purchase Agreement dated as of January 20, 1994 between Nextel and
NTT (the "NTT Stock Purchase Agreement"), respectively, provides that Nextel
will, among other things (i) include the person(s) designated to become a Nextel
Board member under the terms of such agreement (the "Designees") to the slate of
nominees proposed to Nextel's stockholders for election to the Nextel Board, and
recommend to the stockholders the Designees' election to the Nextel Board and
(ii) during any period prior to such election (and, under the terms of the
Comcast Stock Purchase Agreement, prior to the Nextel Board taking any other
actions after Comcast FCI becomes entitled to designate a director), increase
the size of the Nextel Board to create a vacancy for such Designees and promptly
appoint such Designees to the Nextel Board. Pursuant to the Motorola Agreement,
Motorola is entitled to designate two directors, although currently Motorola has
only designated one such director. The terms of each of the Motorola Agreement
and the Comcast Stock Purchase Agreement contemplate that Motorola and Comcast
may grant to certain transferees acquiring shares of Nextel Common Stock from
each of them, respectively, the right to designate not more than one additional
nominee to the Nextel Board pursuant to each such agreement. Pursuant to the
McCaw Securities Purchase Agreement, the McCaw Investor is currently entitled to
nominate three designees for appointment to the Nextel Board in order to bring
its total representation on the Nextel Board to not less than 25%. Finally, the
employment agreements between Nextel and each of Messrs. Akerson, O'Brien and
McAuley contemplate that such executives will serve as members of the Nextel
Board.
The VSCA and the DGCL permit, but do not require, the adoption of a
"classified" board of directors with staggered terms under which part of the
board of directors is elected each year for a maximum term of
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three years. In general, under the VSCA and the DGCL, any or all of the
directors of a corporation may be removed, with or without cause, by vote of the
holders of a majority of the shares then entitled to vote at an election of
directors. Under the VSCA if a director is elected by a class of shares only
that class may remove that director. Under the DGCL a member of a classified
board may be removed by the stockholders only for cause.
The WVB Bylaws provide that the WVB Board shall be of a single class. After
the Merger, holders of the New Class A Common Stock shall have the right, as a
class, to elect nine directors, and holders of the New Class B Common Stock
shall have the right, as a class to elect one director.
The Nextel Charter divides the members of the Nextel Board into three
classes, as nearly equal in number as possible. Each class of directors is
elected for staggered three-year terms to the Nextel Board. Pursuant to the
Comcast Stock Purchase Agreement, at any time that the Comcast group's Voting
Power Ownership Percentage (as defined in the Comcast Stock Purchase Agreement)
equals or exceeds 30%, Nextel is required, upon Comcast FCI's request, to submit
to its stockholders, at its next annual meeting of stockholders, a proposal to
amend the Nextel Charter to eliminate the "classified" Nextel Board so that all
directors would serve one-year terms. The McCaw Investor has the right, as
holder of all outstanding shares of Nextel Class A Preferred Stock, to elect not
less than 25% of the total number of members of the Nextel Board (or three
directors, if greater), and thereafter to vote to remove, replace or re-elect
any such director.
Vote on Merger, Consolidation or Sale of Substantially All Assets
The DGCL generally requires approval of any merger, consolidation or sale
of substantially all the assets of a corporation at a meeting of stockholders by
vote of the holders of a majority of all outstanding shares of the corporation
entitled to vote thereon. The certificate of incorporation of a Delaware
corporation may provide for a greater vote; the Nextel Charter does not so
provide. The VSCA requires approval of a merger or share exchange by the
favorable vote of more than two-thirds of the votes entitled to be cast, unless
the articles of incorporation provide for a different vote. The WVB Charter does
not so provide.
Special Meetings of Stockholders
Under the DGCL, special stockholder meetings of a corporation may be called
by its board of directors and by any person or persons authorized to do so by
its certificate of incorporation or by-laws. Under the VSCA, special stockholder
meetings may be called by the chairman of the board, the president, the board or
persons authorized to do so by the articles of incorporation or the by-laws. The
WVB Bylaws provide that, unless otherwise prescribed by law, the WVB Charter or
the WVB Bylaws, special meetings of the stockholders of WVB shall be called by
the chairman of the board of WVB or by the secretary of WVB at the request of
the chairman, the president of WVB or the WVB Board, or if WVB has 35 or fewer
stockholders of record, upon written demand to the secretary of WVB signed by
the holders of at least 20% of the shares entitled to vote on the issues
proposed to be considered. A request for a special stockholders meeting shall
state the purpose of the proposed meeting. Business transacted at any special
meeting of stockholders shall be limited to the purposes stated in the notice.
Under the Nextel By-laws, special meetings of the stockholders, for any
purpose or purposes, unless otherwise prescribed by statute or by the Nextel
Charter, may be called by the President and shall be called by the President or
Secretary at the request in writing of a majority of the Nextel Board or at the
request in writing of stockholders owning a majority of the capital stock of
Nextel issued and outstanding and entitled to vote. Such request shall state the
purpose or purposes of the proposed meeting.
Stockholder Action by Written Consent
Under the DGCL, any action by a corporation's stockholders must be taken at
a meeting of such stockholders, unless a consent in writing setting forth the
action so taken is signed by the stockholders having not less than the minimum
number of votes necessary to authorize or take such action at a meeting at which
all shares entitled to vote thereon were present and voted. Actions by written
consent, however, may not be
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taken if otherwise provided in the certificate of incorporation. Under the VSCA,
stockholder action without a meeting may be taken only by unanimous written
consent.
The Nextel Charter provides that, subject to certain rights granted to any
class or series of stock having a preference over shares of Nextel Common Stock
(the shares of Nextel Class A Preferred Stock, Nextel Class B Preferred Stock
and Nextel Class C Preferred Stock have the right, as to matters upon which they
are entitled to vote separately as a class, to take such action by written
consent in lieu of a meeting) and Nextel Class B Common Stock, any action
required or permitted to be taken by Nextel stockholders must be effected at a
duly called annual or special meeting of such stockholders and may not be
effected by any consent in writing of such stockholders.
The WVB Bylaws provide that any action required or permitted to be taken at
any meeting of the stockholders of WVB may be taken without a meeting if a
written consent in lieu of such meeting setting forth the action so taken and
the date of execution by each shareholder, is signed by all shareholders
entitled to vote with respect to the subject matter thereof,
Amendment of Certificate of Incorporation
The DGCL allows amendment of a corporation's certificate of incorporation
if its board of directors adopts a resolution setting forth the amendment
proposed, declaring its advisability, and the stockholders thereafter approve
such proposed amendment either at a special meeting called by the board for the
purpose of approval of such amendment by the stockholders or, if so directed by
the board, at the next annual stockholders' meeting. At any such meeting, the
proposed amendment generally must be approved by a majority of the outstanding
shares entitled to vote. Unless the articles of incorporation provide otherwise,
the VSCA permits certain amendments to the articles by the board of directors;
most amendments require a resolution by the board and approval by the
stockholders, generally a majority of the shares entitled to vote. In both
Virginia and Delaware the holders of the outstanding shares of a class are
entitled to vote as a separate class upon a proposed amendment, whether or not
entitled to vote thereon by the certificate of incorporation, if the amendment
would increase or decrease the aggregate number of authorized shares of such
class, increase or decrease the par value of the shares of such class, or alter
or change the powers, preferences, or special rights of the shares of such class
so as to affect them adversely. If any proposed amendment would alter or change
the powers, preferences, or special rights of one or more series of any class so
as to affect them adversely, but not affect the entire class, then only the
shares of the series so affected by the amendment will be considered a separate
class for the purposes of a vote on the amendment. Under the DGCL and the VSCA,
a corporation's certificate of incorporation also may require, for action by the
board or by the holders of any class or series of voting securities, the vote of
a greater number or proportion than is required by the DGCL or the VSCA, as the
case may be, and the provision of the certificate of incorporation requiring
such greater vote cannot be altered, amended or repealed except by such greater
vote.
The WVB Charter does not contain provisions requiring a vote greater than
that specified in the VSCA to amend the WVB Charter. After the Merger, the WVB
Charter will provide that amending the WVB Charter, other than in the ordinary
course of business, will require the affirmative vote of at least two-thirds of
the directors in office and the Class B Director. The Nextel Charter does not
contain provisions requiring a vote greater than that specified in the DGCL to
amend the Nextel Charter.
Amendment of By-laws
Under the VSCA and the DGCL, the power to adopt, amend or repeal a
corporation's by-laws resides with the stockholders entitled to vote thereon,
and with the directors of such corporation if such power is conferred upon the
board of directors by the certificate of incorporation. The Nextel Charter
authorizes the Nextel Board to make, alter, amend or repeal the Nextel By-laws
without any action on the part of the stockholders. The WVB Bylaws provide that
the Bylaws may be amended or repealed and new bylaws adopted by the vote of a
majority of stockholders entitled to vote or by the written consent of such
stockholders, except as otherwise provided by statute. Subject to such right of
the stockholders, the WVB Board may adopt, amend or repeal any provision of the
WVB Bylaws other than a provision or amendment thereof changing the
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maximum authorized number of directors, which requires the approval of the
holders of a majority of shares of WVB Common Stock. After the Merger, the
affirmative vote of at least two-thirds of the directors in office and the Class
B Director will be required to amend the WVB Bylaws other than in the ordinary
course of business.
Certain Limitations Related to the McCaw Transaction
With respect to certain provisions of the Nextel Charter and the Nextel
By-laws amended upon consummation of the McCaw Transaction, any future actions
proposed to be taken in the nature of modifications to or affecting such
provisions may require the consent, approval or vote of the McCaw Investor
and/or its affiliates, in addition to any other required Nextel stockholder or
Nextel Board action.
Director Elected by WVB Class B Common Stockholders
After amendment in connection with the Merger, the WVB Charter will provide
that the corporation's board of directors may not take certain specified actions
without the concurrence of the Class B Director. The actions that require such
consent include (1) certain amendments to the Articles of Incorporation and
Bylaws, (2) the creation of senior equity securities or the amendment of the
rights of any existing capital stock, (3) causing WVB or its material
subsidiaries to issue voting securities with voting rights different from those
of then-outstanding capital stock, (4) certain mergers, asset sales and other
fundamental transactions involving WVB or its affiliates, (5) causing WVB to
enter into any transactions with the holder of New Class A Common Stock other
than on an arm's-length basis, and (6) causing the Surviving Corporation to
issue securities for other than fair market value.
Liability and Indemnification of Officers and Directors
The DGCL provides that a corporation may limit or eliminate a director's
personal liability for monetary damages to the corporation or its stockholders,
except for liability (i) for any breach of the director's duty of loyalty to
such corporation or its stockholders, (ii) for acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of law,
(iii) for paying a dividend or approving a stock repurchase in violation of
Section 174 of the DGCL or (iv) for any transaction from which the director
derived an improper personal benefit. The Nextel Charter provides that, to the
full extent provided by law, a director will not be personally liable for
monetary damages to such corporation or its stockholders for or with respect to
any acts or omissions in the performance of his or her duties as a director of
such corporation.
Under the DGCL, directors and officers as well as other individuals may be
indemnified against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement in connection with specified actions, suits or
proceedings, whether civil, criminal, administrative or investigative (other
than an action by or in the right of the corporation as a derivative action) if
they acted in a manner they reasonably believed to be in, or not opposed to, the
best interest of the corporation, and, with respect to any criminal action or
proceeding, if they had no reasonable cause to believe their conduct was
unlawful. The Nextel Charter and the Nextel By-laws, provide to directors and
officers indemnification to the full extent provided by law, thereby affording
the directors and officers of Nextel the protections available to directors and
officers of Delaware corporations. Article VII of the Nextel By-laws also
provides that expenses incurred by a person in defending a civil or criminal
action, suit or proceeding by reason of the fact that he or she is or was a
director or officer shall be paid in advance of the final disposition of such
action, suit or proceeding, upon receipt of an undertaking by or on behalf of
such director or officer to repay such amount if it shall ultimately be
determined that he or she is not entitled to be indemnified by Nextel as
authorized by relevant Delaware law.
The VSCA provides that in a proceeding brought by or on behalf of a
corporation or its stockholders against an officer or director of the
corporation damages against such officer or director arising out of a single
transaction or occurrence shall not exceed either a monetary amount (which can
be nil), specified in the articles of incorporation or, if approved by the
stockholders, in the by-laws, the greater of $100,000 or the amount of cash
compensation received by such officer or director from the corporation during
the preceding twelve months, provided that the foregoing limitation shall not
apply if such officer or director engaged in
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willful misconduct or knowing violation of criminal law. The VSCA also provides
that a corporation may indemnify an officer, director, employee or agent of the
corporation against liability incurred in a proceeding brought against the
individual because he was an officer, director, employee or agent of the
corporation if he conducted himself in good faith and believed, in the case of
conduct in his official capacity with the corporation, that his conduct was in
its best interests, and in all other cases that his conduct was at least not
opposed to its best interests, and in the case of any criminal proceeding that
he had no reasonable cause to believe his conduct was unlawful. A corporation
may not provide such indemnity in connection with a proceeding in which such
director, officer, employee or agent is adjudged liable to the corporation.
Under the VSCA a corporation may pay for or reimburse the reasonable expenses
incurred by a director, officer, employee or agent of the corporation who is a
party to such a proceeding in advance of final disposition of the proceeding if
such person furnishes a written statement of his good faith belief that he has
met the relevant standard of conduct referred to in the preceding paragraph and
if he furnishes a written undertaking to repay the advance if it is ultimately
determined that he did not meet that standard.
The WVB Bylaws provide that WVB will indemnify each person who may be
entitled to be indemnified pursuant to applicable sections of the VSCA to the
full extent permitted thereby. The WVB Bylaws obligate WVB to indemnify each
such person and in each case, if any, where WVB must make certain investigations
on a case by case basis prior to indemnification, WVB is obligated to pursue
such investigation diligently, it being the specific intention of the WVB Bylaws
to obligate WVB to indemnify each person whom it may indemnify to the full
extent permitted by the VSCA at any time, even if such person is adjudged liable
to WVB. Indemnification shall include, but not be limited to, making advances
and reimbursements for expenses, providing indemnification and obtaining court
orders for advancements, reimbursements and indemnification.
Currently and after the Merger, no officer or director of WVB shall be
personally liable to WVB or its stockholders for monetary damages, provided that
an officer or director shall be liable to the extent provided by the VSCA for
(i) willful misconduct, (ii) a knowing violation of criminal law, (iii) a
knowing violation of federal or state securities laws, or (iv) any transaction
from which the officer or director derived an improper personal benefit.
Dissenters' Rights
Under the DGCL, a stockholder of a corporation participating in certain
merger and similar transactions may, under certain circumstances, receive cash
in the amount of the fair value of his shares (as determined by a court) in lieu
of the consideration he would otherwise receive in the merger or similar
transaction. Unless a corporation's certificate of incorporation provides
otherwise, the DGCL does not require that such dissenters' rights of appraisal
be afforded with respect to a merger or consolidation (i) to stockholders of a
corporation, the shares of which are either listed on a national securities
exchange or the Nasdaq NM or widely held (by more than 2,000 stockholders), if
the stockholders of such corporation receive only shares of the surviving
corporation or of a listed or widely held corporation (plus cash in lieu of any
fractional shares), or (ii) to stockholders of a corporation surviving a merger,
if no vote of such stockholders is required to approve the merger because,
pursuant to Section 251(f) of the DGCL, the agreement of merger does not amend
the certificate of incorporation of the surviving corporation, each share of
stock of the surviving corporation outstanding immediately prior to the
effective date of the merger is to be identical to outstanding or treasury
shares of the surviving corporation after the effective date of the merger and
the number of shares of common stock into which securities to be issued in the
merger can be converted does not exceed 20% of the shares of common stock of the
surviving corporation outstanding immediately prior to the merger. The Nextel
Charter does not provide for appraisal rights and thus holders of shares of
Nextel Common Stock, may not be entitled to appraisal rights in certain
circumstances.
Under the VSCA, a stockholder of a corporation participating in certain
merger and similar transactions may, under certain circumstances, receive cash
in the amount of the fair value of his shares (as determined by a court if
necessary) in lieu of the consideration he would otherwise receive in the merger
or similar transaction. Unless a corporation's articles of incorporation provide
otherwise, the VSCA does not require that such dissenters' rights be afforded
with respect to a merger to stockholders of a corporation, the shares of
54
<PAGE> 57
which are either listed on a national securities exchange or the NSM , or are
held by at least 2,000 record stockholders, if either (i) the plan of merger
requires the holders of the class or series to accept for such shares any of the
following forms of consideration (a) cash, (b) shares of any other corporations
which are listed on a national securities exchange or held of record by at least
2,000 record shareholders, or (c) a combination of cash and shares as set forth
in (b) above; or (ii) the transaction to be voted on is not an "affiliated
transaction" and is approved by a majority of "disinterested directors" as such
terms are defined in the VSCA. The WVB Charter does not provide for appraisal
rights. This summary of dissenters' rights under the VSCA is qualified by
reference to the actual provisions of Article 15 of the VSCA and by reference to
"The Merger --Dissenter's Rights".
Payment of Dividends
The DGCL permits the payment of dividends and the redemption of shares out
of paid-in, earned or other surplus. Under the DGCL, if a dividend is paid out
of capital surplus, stockholders need not be so notified, and dividends may also
be paid out of net profits for the fiscal year in which declared or out of net
profits for the preceding fiscal year, even if the corporation surplus accounts
show a deficit.
The VSCA permits the payment of dividends so long as the payment does not
leave the corporation unable to pay its debts as they come due and so long as
after the payment the corporation has a positive net worth. The WVB Bylaws
provide that subject to the VSCA and to the WVB Charter, dividends payable on
the outstanding capital stock of WVB may be declared by the WVB Board and may be
paid in cash, property or shares of WVB capital stock.
Shares of Nextel Preferred Stock are entitled to the dividend rights and
preferences summarized above under the heading "-- Terms of Nextel Preferred
Stock." In addition (but subject to such preferred stock dividend rights and
preferences), the Nextel Charter provides that the Nextel Board may declare and
pay dividends on shares of Nextel Common Stock and Nextel Class B Common Stock
(collectively, the "Nextel Capital Stock"), payable in cash, or otherwise, only
after payment in full of, or the setting apart for payment in full of, dividends
declared upon shares of Nextel Preferred Stock at the time outstanding, to the
extent of any preference to which such stock is entitled, for all present and
past dividend periods, and after compliance with the provisions for any sinking
or purchase fund or funds for any shares of any series of Nextel Preferred
Stock. The holders of shares of Nextel Preferred Stock will not be entitled to
share in such dividends paid to holders of shares of Nextel Capital Stock,
subject to the provisions of the resolution or resolutions creating any series
of Nextel Preferred Stock. If dividends are declared on the shares of Nextel
Capital Stock which are payable in shares of Nextel Capital Stock, dividends
will be declared which are payable at the same rate on shares of both classes of
Nextel Capital Stock. However, such dividends payable in shares of Nextel Common
Stock will be payable only to holders of shares of Nextel Common Stock and such
dividends payable in shares of Nextel Class B Common Stock will be payable only
to holders of shares of Nextel Class B Common Stock.
Distributions Upon Liquidation
The Nextel Charter provides that in the event of any liquidation,
dissolution, or winding up of Nextel or upon the distribution of the assets of
Nextel, all assets and funds of Nextel remaining (after the payment to the
holders of shares of Nextel Preferred Stock of the full preferential amounts to
which they shall be entitled pursuant to the Nextel Charter and/or the
resolution or resolutions creating any series thereof) shall be divided and
distributed among the holders of shares of Nextel capital stock ratably, except
as may otherwise be provided in any such resolution or resolutions. Neither the
WVB Charter nor the WVB Bylaws provide for distributions upon the dissolution,
liquidation or winding up of WVB.
Compromise and Reorganization
The DGCL permits a corporation to provide in its certificate of
incorporation that whenever a compromise or arrangement is proposed between the
corporation and its creditors or any class of creditors and/or stockholders or
any class of stockholders, a Delaware court of equitable jurisdiction may, upon
appropriate application, order a meeting of such creditors or class of creditors
and/or stockholders or class of
55
<PAGE> 58
stockholders. If a majority in number representing three-fourths in value of
such creditors or class of creditors, and/or of such stockholders or class or
stockholders, agrees to any compromise or arrangement and to any reorganization
of the corporation as a consequence of such compromise or arrangement, such
compromise or arrangement and such reorganization shall, if sanctioned by the
court to which application was made, be binding on all such creditors or class
of creditors, and/or all such stockholders or class of stockholders and the
corporation. The Nextel Charter does not contain such a provision. Neither the
WVB Charter nor the WVB Bylaws provide for compromise or reorganization.
THE SPECIAL MEETING
GENERAL
This Proxy Statement/Prospectus is being furnished to the WVB Shareholders
in connection with the Special Meeting. This Proxy Statement/Prospectus is first
being mailed to the WVB Shareholders on or about December 23, 1996.
DATE, PLACE AND TIME
The Special Meeting will be held at 10:00 a.m., local time, on January 24,
1997, at 2300 Clarendon Blvd., Suite 800, Arlington, Virginia 22201.
RECORD DATE; VOTE REQUIRED
The Board of Directors of WVB has fixed the close of business on November
13, 1996 as the record date (the "Record Date") for the determination of
shareholders of WVB entitled to receive notice of and to vote at the Special
Meeting. Only shareholders of record as of the Record Date are entitled to
receive notice of or to attend the Special Meeting.
On the Record Date, there were 90,341 shares of WVB Common Stock
outstanding and entitled to vote and such shares were held by eight shareholders
of record. Approval of each of the Recapitalization and the Merger Agreement
requires the affirmative vote of the holders of more than two thirds of the
outstanding shares of the WVB Common Stock.
As of the Record Date, the directors and officers of WVB and their
affiliates, who are also the Principal Shareholders, owned beneficially an
aggregate of 90,300 shares of WVB Common Stock (approximately 99.95% of the
shares of WVB Common Stock outstanding as of such date). See "-- Beneficial
Ownership of WVB Common Stock." In addition, each of the Principal Shareholders
has agreed to vote all shares of WVB Common Stock over which he, she or it
exercises voting authority in favor of the Merger Agreement. See "-- Beneficial
Ownership of WVB Class A Common Stock." Approval of the Merger by the WVB
Shareholders, therefore, is assured.
As of the Record Date, the directors and executive officers of Nextel did
not own beneficially any shares of WVB Common Stock.
PROXIES AND REVOCATION
All shares of WVB Common Stock represented by properly executed proxies
received prior to or at the Special Meeting, and not revoked, will be voted in
accordance with the instructions indicated in such proxies. If no instructions
are indicated, such proxies will be voted FOR the Recapitalization and FOR the
Merger Agreement. If any other business is properly brought before the Special
Meeting for consideration, the persons named in the enclosed form of proxy and
acting thereunder will have discretion to vote on such business in accordance
with their best judgment. A holder of shares of WVB Common Stock may revoke his
or her proxy at any time prior to its use by (i) delivering to the Secretary of
WVB a signed notice of revocation or a later dated signed proxy, (ii) attending
the Special Meeting and voting in person or (iii) giving notice of revocation of
the proxy at the Special Meeting. Attendance at the Special Meeting will not in
itself constitute the revocation of a proxy. Prior to the Special Meeting, any
written notice of revocation or subsequent proxy
56
<PAGE> 59
should be sent so as to be delivered to WVB, 2300 Clarendon Blvd., Suite 800,
Arlington, VA 22201, Attention: Secretary, or hand delivered to the Secretary of
WVB at such address, at or before the taking of the vote at the Special Meeting.
BENEFICIAL OWNERSHIP OF WVB COMMON STOCK
The following table sets forth as of the Record Date certain information
regarding the beneficial ownership (the right, by agreement or otherwise, to
direct the voting or disposition of shares) of WVB Common Stock by all executive
officers and directors of WVB, each person known by WVB to own 5% or more of the
outstanding WVB Common Stock and all executive officers and directors of WVB as
a group. Unless otherwise indicated, such persons have sole voting and
dispositive power with respect to the shares indicated.
<TABLE>
<CAPTION>
NUMBER OF SHARES OF WVB PERCENTAGE OF WVB
NAME OF SHAREHOLDER OR DIRECTOR COMMON STOCK COMMON STOCK
- ----------------------------------------------------- ----------------------- -----------------
<S> <C> <C>
Telcom Ventures, LLC*................................ 60,000 66.41%
Rajendra Singh*(5)................................... 5,000(1) 5.53%
Neera Singh*(5)...................................... 5,000(1)(2) 5.53%
The Hersh Raj Singh Education Trust*................. 5,000 5.53%
The Samir Raj Singh Education Trust*................. 5,000 5.53%
South Beach Ventures, Inc.**......................... 10,300 11.40%
Sergio Cardoso**(5).................................. --(3) --
Mark Ein(5).......................................... --(4) --
All directors and executive officers, as a group (4
persons)........................................... 90,300 99.95%
</TABLE>
- ---------------
* The address for each of Telcom Ventures, LLC, Rajendra Singh, Neera Singh,
The Hersh Raj Singh Education Trust and The Samir Raj Singh Education Trust
is 2300 Clarendon Blvd., Suite 800, Arlington, VA 22201.
** The address for each of South Beach Ventures and Sergio Cardoso is c/o
Stella Barros Ltda., Alameda Gabriel Monteiro de Silva, #1556, Sao Paulo,
SP, Brasil 0442-902.
(1) Does not include shares held by Telcom, of which Rajendra Singh is
Chairperson of the Members Committee and President and Neera Singh is Vice
Chairperson of the Members Committee and Vice President. Mr. Singh and Mrs.
Singh disclaim beneficial ownership of the shares held by such company.
(2) Does not include shares held by The Hirsh Raj Singh Education Trust and The
Samir Raj Singh Education Trust, of which Neera Singh is a Trustee. Mrs.
Singh disclaims beneficial ownership of the shares held by such trusts.
(3) Does not include shares held by South Beach Ventures, Inc., of which Mr.
Cardoso is a director, officer and principal shareholder. Mr. Cardoso
disclaims beneficial ownership of the shares held by such company.
(4) Does not include shares held by Telcom Ventures, LLC, of which Mr. Ein is a
member of the Members Committee. Mr. Ein disclaims beneficial ownership of
the shares held by such company.
(5) Director of WVB.
BENEFICIAL OWNERSHIP OF NEXTEL COMMON STOCK
The following table sets forth, as of November 30, 1996 (the "Ownership
Date"), the amount and percentage of shares of each class of Nextel's capital
stock that are deemed under the rules of the Commission to be "beneficially
owned" by (i) each director of Nextel, (ii) the Chief Executive Officer and each
of the four other most highly compensated executive officers of Nextel for the
year ended December 31, 1995 who were employed by Nextel as of the Ownership
Date, (iii) all directors and executive officers of Nextel as a group and (iv)
each person or "group" (as such term is used in Section 13(d)(3) of the Exchange
Act)
57
<PAGE> 60
known by Nextel to be the beneficial owner of more than 5% of the outstanding
shares of each class of Nextel's capital stock.
<TABLE>
<CAPTION>
TITLE OF CLASS OF NEXTEL'S AMOUNT AND NATURE OF APPROXIMATE %
NAME OF BENEFICIAL OWNER CAPITAL STOCK BENEFICIAL OWNERSHIP(1) OF CLASS(2)
- --------------------------------- ---------------------------- -------------------------- -------------
<S> <C> <C> <C>
Daniel F. Akerson................ Nextel Class A Common Stock 2,000,000(3) *
Brian D. McAuley................. Nextel Class A Common Stock 1,757,883(4) *
Morgan E. O'Brien................ Nextel Class A Common Stock 1,366,211(5) *
Keith J. Bane.................... Nextel Class A Common Stock 0(6) *
Robert Cooper.................... Nextel Class A Common Stock 50,000 *
Timothy M. Donahue............... Nextel Class A Common Stock 1,000 *
Craig O. McCaw................... Nextel Class A Common Stock 65,083,723(7) 22.7%
Keisuke Nakasaki................. Nextel Class A Common Stock 0(8) *
Masaaki Torimoto................. Nextel Class A Common Stock 0(9) *
Dennis M. Weibling............... Nextel Class A Common Stock 65,083,723(10) 22.7%
Robert S. Foosaner............... Nextel Class A Common Stock 180,000(11) *
All directors and executive
officers as a group (20
persons)....................... Nextel Class A Common Stock 70,631,295(12) 24.2%
5% STOCKHOLDERS:
Nextel Class A Common Stock
Nextel Class A Preferred
Digital Radio, L.L.C............. Stock 65,083,723(13) 22.7%
2320 Carillon Point Nextel Class B Preferred 8,163,265 100.0%
Kirkland, Washington 98033 Stock 82 100.0%
Motorola, Inc. .................. Nextel Class A Common Stock 60,590,000(14) 23.8%
1303 East Algonquin Road Nextel Class B Common Stock 17,830,000 100.0%
Schaumburg, Illinois 60196
Comcast Corporation.............. Nextel Class A Common Stock 15,278,469(15) 5.8%
1500 Market Street
Philadelphia, Pennsylvania 19102
</TABLE>
- ---------------
* Less than one percent (1%).
(1) Under the rules of the Commission, a person is deemed to be the beneficial
owner of a security if such person, directly or indirectly, has or shares
the power to vote or direct the voting of such security or the power to
dispose or direct the disposition of such security. A person is also deemed
to be a beneficial owner of any securities if that person has the right to
acquire beneficial ownership within 60 days of the Ownership Date.
Accordingly, more than one person may be deemed to be a beneficial owner of
the same securities. Unless otherwise indicated by footnote, the named
individuals have sole voting and investment power with respect to the
shares of Nextel's capital stock beneficially owned.
(2) Represents the voting power of the number of shares of each class of
capital stock beneficially owned as of the Ownership Date by each named
person or group, expressed as a percentage of (a) all shares of Nextel's
capital stock of the indicated Nextel Class actually outstanding as of such
date (in the case of Nextel Common Stock, giving effect to the conversion
of Nextel's preferred stock and Nextel Class B Common Stock), plus (b) all
other shares of capital stock deemed outstanding as of such date pursuant
to Rule 13d-3(d)(1) under the Exchange Act.
(3) Comprised of 2,000,000 shares of Nextel Common Stock which are the subject
of a restricted share grant made to Mr. Akerson in connection with his
employment by Nextel.
(4) Includes 764,634 shares of Nextel Common Stock obtainable as of the
Ownership Date or within 60 days thereafter by Mr. McAuley upon the
exercise of nonqualified stock options. Also includes ownership of 18,000
shares of Nextel Common Stock that are held by Mr. McAuley's minor
children.
(5) Includes 866,063 shares of Nextel Common Stock obtainable as of the
Ownership Date or within 60 days thereafter by Mr. O'Brien upon the
exercise of nonqualified stock options.
58
<PAGE> 61
(6) Mr. Bane, who is Executive Vice President and Chief Corporate Officer of
Motorola, disclaims beneficial ownership of all securities of Nextel held
by Motorola. See note 14.
(7) Mr. McCaw, who is an equity owner and controlling person of the McCaw
Investor, disclaims beneficial ownership of all securities of Nextel held
by the McCaw Investor, except to the extent of his pecuniary interest
therein. See note 13.
(8) Mr. Nakasaki, who is President and Chief Executive Officer of NTT America,
Inc., a subsidiary of NTT, disclaims beneficial ownership of all shares of
Nextel Common Stock held by NTT. As of the Ownership Date, NTT held
1,532,959 shares.
(9) Mr. Torimoto, who is employed by Matsushita as Chief Liaison between
Matsushita and Nextel, disclaims beneficial ownership of all shares of
Nextel Common Stock held by Matsushita. As of the Ownership Date,
Matsushita held 3,000,000 shares.
(10) Mr. Weibling, who is President of Eagle River, an affiliate of the McCaw
Investor, disclaims beneficial ownership of all securities of Nextel held
by the McCaw Investor, except to the extent of his pecuniary interest
therein. See note 13.
(11) Includes 140,000 shares of Nextel Common Stock obtainable as of the
Ownership Date or within 60 days thereafter by Mr. Foosaner upon the
exercise of nonqualified stock options.
(12) Includes an aggregate of 3,958,425 shares of Nextel Common Stock obtainable
as of the Ownership Date or within 60 days thereafter by directors and
executive officers as a group upon the exercise of nonqualified stock
options or other stock purchase rights. See also note 13.
(13) Comprised of (i) 5,593,846 shares of Nextel Common Stock beneficially owned
by the McCaw Investor, (ii) 35,000,000 shares of Nextel Common Stock
obtainable as of the Ownership Date or within 60 days thereafter upon the
exercise of certain options and (iii) 24,489,877 shares of Nextel Common
Stock, which represents the conversion of the 8,163,265 shares of Nextel
Class A Preferred Stock and the 82 shares of Nextel Class B Preferred Stock
held by the McCaw Investor.
(14) Assuming conversion of the Nextel Class B Common Stock held by Motorola.
Comprised of (i) 40,170,000 shares of Nextel Common Stock beneficially
owned by Motorola, (ii) 17,830,000 shares of Nextel Class B Common Stock
beneficially owned by Motorola and (iii) 2,590,000 shares of Nextel Common
Stock obtainable as of the Ownership Date or within 60 days thereafter upon
exercise of a warrant. Excludes 300,000 shares of Nextel Common Stock as to
which such warrant is not exercisable during such period. Motorola granted
the McCaw Investor an option to acquire 9,000,000 shares included herein,
which option is not currently exercisable.
(15) Comprised of 3,728,469 shares of Nextel Common Stock beneficially owned by
Comcast, as reported in the most recent amendment to the Schedule 13D of
Comcast filed on October 1, 1996, and 12,000,000 shares of Nextel Common
Stock obtainable as of the Ownership Date or within 60 days thereafter upon
the exercise of the option held by Comcast covering an aggregate of
25,000,000 shares of Nextel Common Stock.
59
<PAGE> 62
NEXTEL COMMUNICATIONS, INC. AND SUBSIDIARIES SELECTED FINANCIAL DATA
The selected financial data set forth below for the periods indicated
should be read in conjunction with the Consolidated Financial Statements,
related notes and other financial information appearing in Nextel's 1995 Form
10-K Annual Report and Nextel's September 30, 1996 Form 10-Q, incorporated
herein by reference (dollar amounts in thousands except per share amounts).
<TABLE>
<CAPTION>
NINE MONTHS ENDED
FISCAL YEAR ENDED MARCH 31, DECEMBER 31,
-------------------------------------------- ----------------------------
1992 1993 1994 1993 1994(5)(6)
------------ ------------ ------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues...................... $ 52,529 $ 53,002 $ 67,928 $ 48,901 $ 74,857
Cost of Operations............ 18,965 20,979 28,666 19,808 45,498
Selling, general and
administrative expenses..... 15,686 18,971 41,107 24,966 90,985
Expenses related to Corporate
Reorganization(1)........... -- -- -- -- --
Depreciation and
amortization................ 27,273 25,942 58,398 37,129 94,147
------------ ------------ ------------ ------------ ------------
Operating loss................ (9,395) (12,890) (60,243) (33,002) (155,773)
Other income (expense)........ (9,542) 2,248 (18,098) (7,742) (41,421)
Income tax benefit............ 3,266 1,027 21,437 7,656 71,345
------------ ------------ ------------ ------------ ------------
Loss before extraordinary
item........................ (15,671) (9,615) (56,904) (33,088) (125,849)
Extraordinary item(2)......... (12,765) -- -- -- --
------------ ------------ ------------ ------------ ------------
Net Loss...................... $ (28,436) $ (9,615) $ (56,904) $ (33,088) $ (125,849)
============ ============ ============ ============ ============
NET LOSS PER SHARE:
Before extraordinary
item.................... $ (0.58) $ (0.16) $ (0.73) $ (0.43) $ (1.25)
Extraordinary item........ (0.47) -- -- -- --
------------ ------------ ------------ ------------ ------------
Net Loss...................... $ (1.05) $ (0.16) $ (0.73) $ (0.43) $ (1.25)
============ ============ ============ ============ ============
Number of shares used in
computations(3)............. 26,925,000 58,736,000 78,349,000 76,726,000 100,639,000
============ ============ ============ ============ ============
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, SEPTEMBER 30,
---------------------------- ----------------------------
1994(6) 1995(6) 1995 1996
------------ ------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Revenues...................... $ 93,884 $ 171,703 $ 110,752 $ 236,977
Cost of Operations............ 54,356 143,130 91,328 177,556
Selling, general and
administrative expenses..... 107,126 201,909 127,462 234,725
Expenses related to Corporate
Reorganization(1)........... -- 17,372 17,372 --
Depreciation and
amortization................ 115,416 236,178 151,392 291,698
------------ ------------ ------------ ------------
Operating loss................ (183,014) (426,886) (276,802) (467,002)
Other income (expense)........ (51,777) (104,881) (51,916) (147,571)
Income tax benefit............ 85,126 200,602 116,403 216,944
------------ ------------ ------------ ------------
Loss before extraordinary
item........................ (149,665) (331,165) (212,315) (397,629)
Extraordinary item(2)......... -- -- -- --
------------ ------------ ------------ ------------
Net Loss...................... $ (149,665) $ (331,165) $ (212,315) $ (397,629)
============ ============ ============ ============
NET LOSS PER SHARE:
Before extraordinary
item.................... $ (1.51) $ (2.31) $ (1.68) $ (1.80)
Extraordinary item........ -- -- -- --
------------ ------------ ------------ ------------
Net Loss...................... $ (1.51) $ (2.31) $ (1.68) $ (1.80)
============ ============ ============ ============
Number of shares used in
computations(3)............. 98,818,000 143,283,000 126,636,000 221,309,000
============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
AS OF
AS OF MARCH 31, AS OF DECEMBER 31, SEPTEMBER 30,
---------------------------------- ------------------------ -------------
1992 1993 1994 1994 1995 1996
-------- -------- ---------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents...... $ 13,393 $ 17,083 $ 483,483 $ 301,679 $ 340,826 $ 219,508
Marketable securities.......... -- 14,768 426,113 172,313 68,443 4,998
Current assets................. 20,161 39,932 921,983 504,248 504,661 386,326
Intangible assets, net......... 160,558 144,666 889,912 1,451,780 3,549,622 3,886,286
Total assets................... 210,797 333,557 2,197,266 2,889,110 5,512,827 5,989,318
Long-term debt(4).............. 1,028 55,024 1,080,702 1,163,221 1,653,400 2,470,995
Stockholders' equity........... 191,108 255,224 846,304 1,268,575 2,945,141 2,951,519
</TABLE>
- ---------------
(1) See Note 2 to the Notes to Nextel's consolidated financial statements
incorporated herein by reference.
(2) Represents the effect of the early extinguishment of debt.
(3) Includes the weighted average number of shares of Nextel Common Stock
outstanding during the respective periods.
(4) Excludes the current portions of long-term debt. See Note 5 to the Notes to
Nextel's consolidated financial statements, incorporated herein by
reference.
(5) Effective December 31, 1994, Nextel changed its fiscal year end from March
31 to December 31. Accordingly, the income statement data is presented for
the transition period from April 1, 1994 to December 31, 1994.
(6) Certain amounts presented have been reclassified to conform to the
presentation for the periods ended September 30, 1995 and 1996.
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<PAGE> 63
WIRELESS VENTURES OF BRAZIL, INC. AND SUBSIDIARIES
SELECTED FINANCIAL DATA
The selected financial data set forth below as of December 31, 1995 and
1994 and for the year ended December 31, 1995 are derived from the audited
consolidated financial statement of WVB included elsewhere in this Proxy
Statement/Prospectus. The selected financial data presented below for the year
ended December 31, 1994 and for the nine-month periods ended September 30, 1996
and 1995 and as of September 30, 1996 are derived from the unaudited
consolidated financial statements of WVB included elsewhere in this
Proxy/Prospectus and should be read in conjunction therewith.
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31,
------------------ -------------------
1996 1995 1995 1994
------- ------- -------- -------
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues............................................... $10,909 $ 6,463 $ 10,099 $ 916
Cost of operations..................................... 5,933 4,682 7,622 786
Gross Profit........................................... 4,976 1,781 2,477 130
Selling, general and administrative expenses........... 10,961 7,391 10,101 4,275
Depreciation and amortization.......................... 3,697 3,691 5,305 2,688
Operating loss......................................... (9,682) (9,301) (12,929) (6,833)
Other income (expense)................................. (1,067) (238) (797) (169)
Income tax benefit..................................... 1,370 461 8,694 1,964
Net loss............................................... (9,379) (9,078) (5,032) (5,038)
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
SEPTEMBER 30, ------------------
1996 1995 1994
------------- ------- -------
(IN THOUSANDS EXCEPT PER SHARES AMOUNTS)
<S> <C> <C> <C>
BALANCE SHEET DATA (AT PERIOD END):
Current Assets.............................................. $ 7,443 $ 7,184 $ 2,565
License rights, net......................................... 48,735 50,466 54,261
Total Assets................................................ 64,549 66,544 63,486
Current Liabilities......................................... 30,659 22,493 8,675
Non-current deferred income tax liability................... 13,053 14,533 23,696
Total liabilities........................................... 44,926 37,634 32,370
Stockholders' Equity(1)..................................... 19,623 28,910 31,116
</TABLE>
- ---------------
(1) No dividends were paid on WVB Common Stock for any period presented.
61
<PAGE> 64
WVB MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with
WVB's financial statements and the notes thereto appearing elsewhere herein.
OVERVIEW
WVB was established in late 1993 to provide wireless telecommunications
services over SMR channels in the 800 MHz frequency in Brazil. WVB began
operations in 1994. As of September 30, 1996, WVB owned or had the right to use
SMR licenses covering a total of 1,700 SMR channels in 27 Brazilian metropolitan
areas, including Sao Paulo, Rio de Janeiro, Belo Horizonte, Porto Alegre and
Brasilia. As of September 30, 1996, WVB's most significant channel block was in
Sao Paulo, the world's second most populous metropolitan area, where it held 195
of the 420 SMR channels that were allocated as of such date and WVB held
licenses in metropolitan areas (the "Operating Regions") that have a population
of more than 55 million persons, comprising over 35% of Brazil's total
population. WVB's subsidiaries operate the largest SMR wireless
telecommunications network in Brazil, as measured by the number of channels in
operation, customer base and population of operating regions.
WVB's analog SMR services are principally provided through AirLink Servicos
e Comercio Ltda. ("AirLink"), a Brazilian limited liability company formed on
August 15, 1994 and wholly owned by WVB, which supports the operations of WVB's
license-holding subsidiaries pursuant to service contracts. As of September 30,
1996, AirLink had approximately 120 employees. As of September 30, 1996, AirLink
had approximately 12,100 analog SMR subscribers in Sao Paulo. Analog SMR systems
also have been installed by AirLink and are operational in the following 14
additional Operating Regions: Rio de Janeiro, Belo Horizonte, Brasilia,
Campinas, Porto Alegre, Recife, Fortaleza, Jundai, Sao Jose dos Campos, Belem,
Goiania, Florianopolis, Riberiao Preto and Santos. These Operating Regions were
serving approximately 3,100 analog SMR subscribers as of September 30, 1996.
Approximately 70% of WVB's subscriber units use mobile units interconnected with
the public switched telephone network.
WVB has derived its revenues primarily from (i) activation fees, which are
the initial charges paid by a new subscriber for service, (ii) monthly fixed
service charges, which vary depending upon the plan chosen by the subscriber,
(iii) airtime charges, which are billed based on usage, (iv) the sale of radio
equipment to customers and (v) monthly rental charges from the leasing of radio
equipment to customers.
The principal expenses incurred by WVB include (i) costs incurred in the
acquisition of SMR license-holding entities, (ii) depreciation expenses
associated with capital costs incurred in the construction of its SMR network,
(iii) operating costs associated with inventory acquisition, including the cost
of radios purchased for sale and related import duties, and the operation of
WVB's SMR system and (iv) selling, general and other administrative costs.
WVB's financial statements are prepared in accordance with U.S. generally
accepted accounting principles and reported in U.S. dollars. As a result WVB's
financial results are subject to the effects of fluctuations in exchange rates
between the U.S. dollar and the Brazilian real. WVB's policy has been to not
engage in currency hedging activities due to the cost of such operations.
RESULTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO NINE MONTHS ENDED SEPTEMBER
30, 1995
Revenues for the nine months ended September 30, 1996 were approximately
$10.9 million compared to approximately $6.5 million for the nine months ended
September 30, 1995, an increase of approximately $4.4 million or 69%. The
increase in revenues was generally due to the significantly greater number of
channels in operation and subscribers in the 1996 period. Cost of operations was
approximately $5.9 million for the nine months ended September 30, 1996 compared
to approximately $4.7 million for the nine months ended September 30, 1995, an
increase of approximately $1.2 million or 27%. The increase in operating costs
was due to WVB's increased level of operations in the 1996 period.
62
<PAGE> 65
Selling, general and administrative expenses were approximately $11.0
million for the nine months ended September 30, 1996 compared to approximately
$7.4 million for the nine months ended September 30, 1995, an increase of
approximately $3.6 million or 48%. As a percentage of total revenues, selling,
general and administrative expense decreased to 100% for the first nine months
of 1996 compared to 114% for the comparable period of 1995 again primarily due
to WVB's higher level of operations in 1996.
Other expenses, net increased by approximately $0.8 million in the first
nine months of 1996 as compared to the first nine months of 1995, due to an
increase in interest expense, which was offset partially by increases in
interest income and foreign currency translation. Interest expense increased by
$1.3 million to approximately $1.8 million in the 1996 period due to increased
borrowings by AirLink from Brazilian lenders and the increase in WVB's working
capital loan from Telcom. Interest income during the 1996 nine months period
increased by $0.3 million from the 1996 period to $0.7 million. WVB recognized a
gain of $0.03 million from foreign currency translation compared to a loss of
$0.1 million in 1995. Income tax benefit was $1.4 million for the first nine
months of 1996 as compared to $0.5 million during the first nine months of 1995.
The net loss of WVB was approximately $9.4 million for the nine months
ended September 30, 1996 compared to approximately $9.1 million for the nine
months ended September 30, 1995, a decrease of approximately $0.3 million. This
was largely the result of the significant increase in revenues offset by a
lesser percentage increase in operating costs and expenses.
YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994
Revenues for the year ended December 31, 1995 were approximately $10.1
million compared to approximately $0.9 million for the year ended December 31,
1994, representing an increase of approximately $9.2 million. The increase in
revenues was generally due to the significantly greater number of SMR channels
in operation and subscribers in 1995. Cost of operations was approximately $7.6
million for the year ended December 31, 1995 compared to approximately $0.8
million for the year ended December 31, 1994, an increase of approximately $6.8
million. The increase in operating costs was due to WVB's increased level of
operations in the 1995. Gross profit was approximately $2.5 million for the year
ended December 31, 1995 compared to approximately $0.1 million for the prior
year, an increase of approximately $2.4 million. The increase in gross profit
largely resulted from corresponding revenue growth.
Selling, general and administrative expenses were approximately $10.1
million for the year ended December 31, 1995 compared to approximately $4.3
million for the year ended December 31, 1994, an increase of approximately $5.8
million. Amortization and depreciation expense, principally related to the
amortization of the SMR licenses and related telecommunications equipment of
WVB's subsidiaries, increased to $5.3 million in 1995 from $2.7 million in 1994.
In light of these developments, WVB's operating loss increased from $6.8 million
in 1994 to $12.9 million in 1995.
Interest expense increased by $0.95 million to approximately $1.0 million
in 1995 due to borrowings by WVB for capital expenditures and working capital
purposes from Telcom. In 1995 WVB recognized a gain of approximately $0.013
million from foreign currency translation compared to a loss of $0.362 million
in 1994. The income tax benefit was $8.7 million for 1995 as compared to
approximately $2.0 million during 1994, primarily due to a significant decrease
in the Brazilian tax rate in 1995. The net loss of WVB was approximately $5.0
million in both 1995 and 1994.
LIQUIDITY AND CAPITAL RESOURCES
WVB has experienced substantial negative cash flow from operations since
its inception. Consequently, WVB has generally funded its operating requirements
with cash contributed or loaned by its shareholders, together with funds
generated from operations and bank financing within Brazil. Cash and cash
equivalents were approximately $0.005 million at September 30, 1996, a decrease
of approximately $0.078 million from September 30, 1995. Net cash used by
operations was approximately $9.5 million in 1995 and approximately $2.3 million
in 1994. During 1995 and the first nine months of 1996, WVB borrowed
approximately $18.2 million (including interest charges) from Telcom under a
demand revolving promissory note. These borrowings were used to purchase
telecommunications equipment, to fund the acquisition of license holding
63
<PAGE> 66
companies and for working capital. WVB's working capital deficit was
approximately $23.2 million at September 30, 1996 versus $15.3 million at
December 31, 1995. The increase is primarily due to the impact of the loss
incurred by WVB in the first nine months of 1996. Under the Merger Agreement,
the current shareholders of WVB are obligated to make a payment to WVB to the
extent that WVB's working capital deficit exceeds $6,000,000 (excluding amounts
due under the loan from Telcom) as of the Closing Date.
The continued development of WVB's SMR systems will require continued
substantial investment in telecommunications equipment as well as related
installation costs. Although WVB has historically been able to obtain limited
amounts of bank financing in Brazil through either loans or discounted sales of
accounts receivable, WVB does not have any substantial credit lines.
Furthermore, during 1996 WVB has increasingly rescheduled many of its current
tax and vendor obligations within Brazil. No assurance can be given that WVB
will be able to continue to reschedule such payment obligations on an ongoing
basis or that WVB will be able to obtain other sources of financing.
INFLATION
During the years 1996, 1995 and 1994, WVB's Brazilian operations were
considered to be in a "highly inflationary" economy, as such term is defined in
Statement of Financial Accounting Standards No. 52, Foreign Currency
Translations. Accordingly, WVB uses the U.S. dollar as the functional currency.
Therefore, certain assets and liabilities are translated at historical exchange
rates while other assets and liabilities are translated at current exchange
rates.
INFORMATION ABOUT WVB
WVB through its subsidiaries, provides analog SMR services in the 800 MHz
frequency band in 27 of Brazil's largest metropolitan areas. As of September 30,
1996, WVB's subsidiaries held or had the right to use licenses for a total of
1,700 channels in these 27 metropolitan areas covering over 55 million people.
Key metropolitan areas in which WVB has licenses include Brazil's largest
cities, Sao Paulo, Rio de Janeiro, Belo Horizonte, Porto Alegre and Brasilia.
WVB's most significant channel block is in Sao Paulo, the world's second most
populous metropolitan area, where it holds 195 of the 420 SMR channels that are
currently allocated. The licenses have terms of 15 years. Nationwide, WVB had
installed 27 transmission sites and had approximately 15,000 subscribers as of
September 30, 1996.
WVB's analog SMR services are marketed and provided through AirLink, a
Brazilian limited liability company formed on August 15, 1994 and wholly owned
by WVB. As of September 30, 1996, AirLink had approximately 120 employees, of
whom 45 were sales and marketing personnel, 36 were technical personnel, and the
balance were management, finance and administrative personnel. As of September
30, 1996, WVB's subsidiaries had approximately 12,100 analog SMR subscribers in
Sao Paulo. Analog SMR systems also have been installed by WVB's subsidiaries and
are operational in 14 other Operating Regions. These Operating Regions were
serving approximately 3,100 analog mobile subscribers as of September 30, 1996.
Approximately 70% of WVB's subscriber units use mobile units interconnected with
Brazil's public switched telephone network.
WVB's strategy in Brazil has included the development of a digital SMR
network to offer high-volume and high-quality two-way voice and dispatch
service. WVB has been considering adoption of Motorola's iDEN technology. Use of
the iDEN technology would allow WVB to offer enhanced services to dispatch
clients, which constitute the bulk of the existing WVB analog SMR client base.
In addition to the frequency planning and system design, the implementation
of WVB's proposed digital SMR network will require site acquisition, equipment
procurement, construction and equipment installation, testing and optimization.
As WVB identifies the optimal areas in which sites should be located, WVB would
seek to make additional site acquisitions which would include obtaining leases,
permits and regulatory or government approvals for appropriate sites. WVB would
also consider existing towers and other suitable locations.
64
<PAGE> 67
WVB's strategy is to first introduce digital service in the Sao Paulo
metropolitan area; this initial coverage area was selected due to the
anticipated heavy volume of traffic demand. The roll-out of the cell sites has
been planned to minimize the costs to implement, operate and expand the capacity
of the network and thereby enable WVB to offer high quality service at
affordable prices. The roll-out plan consists of three phases, each of which
provides additional market area and enhanced signal quality and capacity to
WVB's network.
MATERIAL CONTRACTS AND OTHER RELATIONSHIPS BETWEEN NEXTEL AND
WVB AND THEIR RESPECTIVE AFFILIATES
During the last three years Nextel and WVB have not had any direct
contractual or other relationships. During this period, however, various
contractual and other relationships have existed between various affiliates of
WVB, on the one hand, and Nextel, on the other hand, as described below.
During the years ended December 31, 1995, 1994 and 1993, LCC International,
Inc. (including its predecessors Telcom Solutions, Inc. and LCC, Incorporated,
"LCC International") provided various engineering and related consulting
services for Nextel, as well as related engineering hardware and software
products, in the ordinary course of business. The amount of such sales and
services provided to Nextel by LCC International or its predecessors in 1995,
1994 and 1993 was approximately $14.7 million, $14.0 million and $6.6 million,
respectively. LCC International is majority owned by Telcom, the majority
shareholder of WVB.
In March 1995, another subsidiary of Telcom assumed from Craig O. McCaw an
obligation of $9,845,000 to fund such subsidiary's investment in the McCaw
Investor, which is a significant shareholder of Nextel. Such obligation bears
interest at LIBOR plus 1.5% per annum and is payable in quarterly installments
that commenced in November 1995 and which terminate at maturity in August 1997.
Telcom holds an approximate 2.735% indirect interest in the McCaw Investor.
In December 1995, Telcom borrowed $6,960,000 from a subsidiary of Nextel,
which funds were used in the business of Telcom. This loan bears interest at 8%
per annum and was originally due 180 days following demand. In June 1996, the
parties amended the note such that it becomes due and payable on July 5, 1997.
In addition, in December 1995, Nextel agreed to place $8,457,000 on deposit with
a commercial bank to serve as cash collateral for a letter of credit issued by
such bank on behalf of a subsidiary of Telcom. Such letter of credit expires in
December 1996. In the event such letter of credit is drawn upon, Telcom is
obligated to repay the amount of such draws, together with 8% interest thereon,
on July 5, 1997.
Nextel and a company controlled by a principal indirect owner of Telcom are
both shareholders of Corporacion Mobilcom S.A. de C.V. ("Mobilcom"), which is
the holder of certain SMR licenses and related assets in Mexico. In June 1996, a
subsidiary of Nextel and such Telcom affiliate (together with other Mobilcom
shareholders) entered into a Put-Call Agreement under which Nextel granted the
Telcom affiliate and the other Mobilcom shareholders the right to require Nextel
to purchase their shares under certain circumstances at a price calculated by a
formula taking into consideration the fair market value of the purchased shares.
In addition, Nextel was granted the right to require these Mobilcom shareholders
to sell their shares to Nextel under certain circumstances at a similarly
determined price.
On October 28, 1996 Telcom and MIL agreed (subject to certain conditions,
including necessary changes to Argentine SMR regulations) to form a joint
venture with respect to their SMR operations in Argentina. Telcom owns a 70%
interest in Wireless Ventures of Argentina ("WVA"), which, through its
subsidiaries, holds SMR licenses in 6 cities in Argentina. MIL owns McCaw
Argentina, S.A., which holds SMR licenses in 4 cities in Argentina. The
agreement is subject to a number of conditions, including the closing of the
Merger and the amendment prior to December 31, 1997 of SMR regulations in
Argentina that currently limit to 100 the number of SMR channels that any single
entity or affiliated group of entities may control in any particular Argentine
city. MIL and Telcom also entered into a Purchase Agreement dated as of October
28, 1996 pursuant to which MIL agreed to purchase (subject to certain
conditions, including the closing of the Merger), for a one-year promissory note
in the amount of $2,500,000, a 50% interest in the Argentina paging business
owned by WVA.
65
<PAGE> 68
LEGAL MATTERS
The validity of the securities offered hereby will be passed upon for
Nextel by Jones, Day, Reavis & Pogue, counsel for Nextel. Certain tax matters
have been passed upon for WVB by Dewey Ballantine.
EXPERTS
The consolidated financial statements and related financial statement
schedules of Nextel incorporated in this Proxy Statement/Prospectus by reference
from Nextel's Annual Report on Form 10-K for the year ended December 31, 1995,
have been audited by Deloitte & Touche LLP, independent auditors, as stated in
their report, which is incorporated herein by reference, and have been so
incorporated in reliance upon the report of such firm given upon their authority
as experts in accounting and auditing.
The consolidated financial statements of Dial Page, Inc. and subsidiaries
as of December 31, 1995 and for the year then ended, incorporated herein by
reference from Nextel's Form 8-K/A filed on April 26, 1996, have been audited by
Deloitte & Touche LLP, independent auditors, as stated in their report, which is
incorporated herein by reference, and have been so incorporated in reliance upon
the report of such firm given upon their authority as experts in accounting and
auditing.
The consolidated financial statements of Dial Page, Inc. and subsidiaries
as of December 31, 1993 and 1994 and for each of the years in the three-year
period ended December 31, 1994, which are included as part of Nextel's Form 8-K
dated February 6, 1996, as amended, have been incorporated by reference herein
in reliance upon the report, dated February 17, 1995, of KPMG Peat Marwick LLP,
independent certified public accountants, incorporated by reference herein, and
upon the authority of said firm as experts in accounting and auditing.
The consolidated financial statements of WVB and subsidiaries as of
December 31, 1995 and for the year then ended and the consolidated balance sheet
of WVB and subsidiaries as of December 31, 1994 have been included herein and in
the registration statement in reliance upon the report of KPMG Peat Marwick LLP,
independent certified public accountants appearing elsewhere herein, and upon
the authority of said firm as experts in accounting and auditing.
66
<PAGE> 69
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS OF WVB
<TABLE>
<S> <C>
Consolidated Financial Statements for the Years Ended December 31, 1995 and 1994:
Independent Auditors' Report.................................................... F-2
Consolidated Balance Sheets..................................................... F-3
Consolidated Statements of Operations........................................... F-4
Consolidated Statements of Stockholders' Equity................................. F-5
Consolidated Statements of Cash Flows........................................... F-6
Notes to Consolidated Financial Statements...................................... F-7
Consolidated Financial Statements for and as of the Nine Months Ended September 30,
1996 and 1995 (unaudited):
Consolidated Balance Sheet (unaudited).......................................... F-20
Consolidated Statements of Operations (unaudited)............................... F-21
Consolidated Statements of Cash Flows (unaudited)............................... F-22
Notes to Consolidated Financial Statements (unaudited).......................... F-23
</TABLE>
F-1
<PAGE> 70
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Wireless Ventures of Brazil, Inc.:
We have audited the accompanying consolidated balance sheets of Wireless
Ventures of Brazil, Inc. and subsidiaries as of December 31, 1995 and 1994, and
the related consolidated statements of operations, stockholders' equity, and
cash flows for the years then ended. These consolidated financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audits.
Except as discussed in the following paragraphs, we conducted our audits in
accordance with generally accepted auditing standards. Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
The Company did not maintain its accounting records currently during the
early part of the year ended December 31, 1994 and before, requiring
reconstruction of certain records and adjustments to the accounts. Adequate
evidential matter in support of recorded transactions was not available in all
cases. It was impracticable to extend our procedures sufficiently to determine
the extent to which the Company's results of operations and cash flows for the
year ended December 31, 1994, may have been affected by these conditions.
As discussed in note 2 to the consolidated financial statements, the
Company did not consolidate the results of operations of its former subsidiary,
K-Tel Telecommunicacoes S/C, Ltda. (K-Tel) for the six months ended June 30,
1994 prior to its disposition. Generally accepted accounting principles would
require the results of operations of K-Tel for the six months ended June 30,
1994 to be consolidated with the results of operations for the Company. As a
result of the matter discussed in the preceding paragraph, the effect of not
consolidating the results of operations of K-Tel in the accompanying
consolidated statement of operations for the year ended December 31, 1994 is not
determinable.
Because of the matters discussed in the preceding paragraphs, the scope of
our work was not sufficient to enable us to express, and we do not express, an
opinion on the results of operations, changes in stockholders' equity and cash
flows for the year ended December 31, 1994.
In our opinion, the consolidated balance sheets of Wireless Ventures of
Brazil, Inc. and subsidiaries as of December 31, 1995 and 1994 and the related
statements of operations, stockholders' equity and cash flows for the year ended
December 31, 1995 present fairly, in all material respects, the financial
position of Wireless Ventures of Brazil, Inc. and subsidiaries as of December
31, 1995 and 1994, and the results of their operations and their cash flows for
the year ended December 31, 1995 in conformity with generally accepted
accounting principles.
KPMG PEAT MARWICK LLP
Washington, D.C.
May 31, 1996, except as to footnote 15
which is as of June 14, 1996
F-2
<PAGE> 71
WIRELESS VENTURES OF BRAZIL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
------------ -----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.................................... $ 62,447 $ 572,005
Trade accounts receivable, net of allowance for doubtful
accounts of $1,535,055 and $54,641 (note 8)................. 3,129,357 228,767
Prepaid expenses and other current assets.................... 522,729 478,704
Inventory, net (note 2)...................................... 3,433,337 1,050,346
Due from officers and employees.............................. 35,809 59,271
Deferred income taxes (note 6)............................... -- 175,762
------------ -----------
Total current assets.............................................. 7,183,679 2,564,855
Property and equipment, net of accumulated depreciation and
amortization (notes 3 and 5).................................... 8,663,016 6,446,546
License rights, net of accumulated amortization of $6,433,857 and
$2,639,348 (notes 2 and 4)...................................... 50,466,493 54,261,002
Intangible assets, net of accumulated amortization of $104,167 and
$54,167 (notes 2 and 4)......................................... 145,833 195,833
Other assets...................................................... 84,790 17,435
------------ -----------
$ 66,543,811 $63,485,671
============ ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses........................ $ 6,547,627 $ 3,595,382
Due to affiliates (note 5)................................... 404,603 396,538
Bank loans payable (note 8).................................. 806,919 397,447
Interest payable (notes 8 and 9)............................. 681,720 10,700
Income taxes payable (note 6)................................ 200,000 200,000
Amounts payable for business acquisitions (note 4)........... 1,000,000 4,074,648
Deferred income taxes (note 6)............................... 292,893 --
Short-term note payable to majority stockholder (note 9)..... 12,559,670 --
------------ -----------
Total current liabilities......................................... 22,493,432 8,674,715
Other............................................................. 607,423 --
Deferred income taxes (note 6).................................... 14,533,354 23,695,514
------------ -----------
Total liabilities................................................. 37,634,209 32,370,229
------------ -----------
Stockholders' equity:
Common stock; $.01 par value; 1,000,000 shares authorized;
90,341 and 90,300 shares issued and outstanding (notes 9,
12, and 13)................................................. 903 903
Additional paid-in capital (notes 4, 5, and 13).............. 39,212,452 36,386,585
Accumulated deficit.......................................... (10,303,753) (5,272,046)
------------ -----------
Total stockholders' equity........................................ 28,909,602 31,115,442
------------ -----------
Commitments and contingencies (notes 1, 2, 4, 7, 10, 14, and
15)............................................................. $ 66,543,811 $63,485,671
============ ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE> 72
WIRELESS VENTURES OF BRAZIL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Revenues........................................................... $10,099,117 $ 916,329
Cost of operations................................................. 7,621,663 786,341
----------- -----------
Gross profit....................................................... 2,477,454 129,988
Selling, general and administrative expenses (note 5).............. 10,100,903 4,275,570
Depreciation and amortization expense.............................. 5,305,773 2,687,855
----------- -----------
Operating loss..................................................... (12,929,222) (6,833,437)
Other income (expense):
Interest income (note 4)...................................... 125,050 189,428
Gain (loss) on foreign currency translation................... 13,301 (362,348)
Interest expense (note 9)..................................... (964,437) (23,829)
Other, net.................................................... 30,096 28,104
----------- -----------
Loss before income tax benefit..................................... (13,725,212) (7,002,082)
Income tax benefit (note 6)........................................ 8,693,505 1,964,204
----------- -----------
Net loss........................................................... $(5,031,707) $(5,037,878)
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE> 73
WIRELESS VENTURES OF BRAZIL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
ADDITIONAL TOTAL
COMMON PAID-IN ACCUMULATED STOCKHOLDERS'
STOCK CAPITAL DEFICIT EQUITY
------ ----------- ------------ ------------
<S> <C> <C> <C> <C>
Balance at December 31, 1993................. $ 8 $18,504,431 $ (234,168) $ 18,270,271
Capital contributions........................ -- 13,283,763 -- 13,283,763
Contributed capital -- equipment purchased
and expenses paid by majority stockholder
(note 5)................................... -- 2,194,705 -- 2,194,705
Debt forgiven by K-Tel (note 5).............. -- 385,945 -- 385,945
Debt forgiven by Airfone stockholders (note
5)......................................... -- 133,193 -- 133,193
Book value of K-Tel upon its sale to Telcom
Ventures (note 4).......................... -- (199,000) -- (199,000)
Stock split (note 12)........................ 792 (792) -- --
Net loss..................................... -- -- (5,037,878) (5,037,878)
Issuance of 10,300 shares of common stock
(note 4)................................... 103 2,084,340 -- 2,084,443
------ ----------- ------------ ------------
Balance at December 31, 1994................. 903 36,386,585 (5,272,046) 31,115,442
Capital contributions........................ -- 2,060,917 -- 2,060,917
Contributed capital -- expenses paid by
majority stockholder (note 5).............. -- 747,450 -- 747,450
Net loss..................................... -- -- (5,031,707) (5,031,707)
Issuance of 31 shares of common stock (note
13)........................................ -- 12,500 -- 12,500
Issuance of 10 shares of common stock........ -- 5,000 -- 5,000
------ ----------- ------------ ------------
Balance at December 31, 1995................. $903 $39,212,452 $(10,303,753) $ 28,909,602
====== ========== =========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE> 74
WIRELESS VENTURES OF BRAZIL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
----------- ------------
<S> <C> <C>
Cash flows from operating activities:
Net loss..................................................... $(5,031,707) $ (5,037,878)
Adjustments to reconcile net loss to net cash used by
operating activities:
Depreciation and amortization expense................... 5,305,773 2,687,855
Provision for doubtful accounts......................... 1,480,416 54,641
Deferred tax benefit.................................... (8,693,505) (2,164,204)
Stock grant............................................. 12,500 --
Change in assets and liabilities, net of effects from
business acquisition:
Increase in accounts receivable.................... (4,381,004) (268,903)
(Increase) decrease in prepaid expenses and other
current assets.................................. (111,380) 123,699
Increase in inventory.............................. (2,382,991) (1,039,822)
(Increase) decrease in due from officers and
employees....................................... 23,462 (59,271)
Increase in accounts payable and accrued
expenses........................................ 3,559,668 2,991,021
Increase in due to affiliates...................... 8,065 161,442
Increase in interest payable....................... 671,020 10,700
Increase in income taxes payable................... -- 200,000
----------- ------------
Net cash used in operating activities............................. (9,539,683) (2,340,720)
----------- ------------
Cash flows from investing activities:
Purchase of property and equipment........................... (3,677,736) (5,208,002)
Acquisition of licensee companies, net of cash acquired...... (3,074,648) (7,979,653)
----------- ------------
Net cash used in investing activities............................. (6,752,384) (13,187,655)
----------- ------------
Cash flows from financing activities:
Capital contributions and stock issuances.................... 2,813,367 15,997,606
Proceeds from note payable to majority stockholder........... 12,559,670 --
Payments on bank loans payable............................... (397,447) --
Proceeds from bank loans payable............................. 806,919 41,189
----------- ------------
Net cash provided by financing activities......................... 15,782,509 16,038,795
----------- ------------
Net increase (decrease) in cash and cash equivalents.............. (509,558) 510,420
Cash and cash equivalents at beginning of year.................... 572,005 61,585
----------- ------------
Cash and cash equivalents at end of year.......................... $ 62,447 $ 572,005
----------- ------------
Supplemental disclosure of cash flow information
Cash paid during the year for interest....................... $ 282,717 $ 35,185
----------- ------------
</TABLE>
(Continued)
F-6
<PAGE> 75
WIRELESS VENTURES OF BRAZIL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED
Supplemental disclosure of noncash investing and financing activities
In November 1994, the Company acquired stock of Telemobile -
Telecommunicacoes, Ltda. (Telemobile) and Promobile - Telecommunicacoes, Ltda.
(Promobile) for a total purchase price of $6,782,000, $1,000,000 and $3,782,000
of which was payable as of December 31, 1995 and 1994, respectively. These
amounts have been reported in amounts payable for business acquisitions within
the accompanying consolidated financial statements. Further, in conjunction
with the acquisition of Telemobile and Promobile, the Company established a
deferred tax liability of approximately $5,549,000 which amount has been
recorded as an increase in the value of the intangible license rights acquired.
In September 1994, the Company acquired stock of Master-Tec
Telecommunicacoes Industria e Comercio Productos Electronicos, Ltda.
(Master-Tec). In conjunction with this acquisition, the Company established a
deferred tax liability of approximately $2,455,000. Such amount has been
recorded as an increase in the value of the intangible license rights acquired.
In July 1994, the Company acquired the stock of Airfone Comercio e Servicos
de Radifonia Ltda. (Airfone) for a total purchase price of approximately
$7,555,000. Of this amount, the Company converted a current note receivable from
the former owners of Airfone in the amount of $5,000,000 plus approximately
$177,000 in accrued interest. The Company also issued stock, the value of which
was determined to be approximately $2,084,000 (see note 4). In conjunction with
the acquisition, the Company assumed liabilities of approximately $1,172,000 and
established a deferred tax liability of approximately $6,400,000 which amount
has been recorded as an increase in the value of the intangible license rights
acquired.
In July 1994, the Company acquired the remaining 6 percent of the capital
stock of Via Radio Telecommunicacoes, S.A. (VR-1). In conjunction with this
acquisition, the Company established a deferred tax liability of approximately
$64,000. Such amount has been recorded as an increase in the value of the
intangible license rights acquired.
In July 1994, the Company acquired the remaining 30 percent of the stock of
Radio Telecommunicacoes do Brazil, Ltda. (Radio-Telecom). In conjunction with
this acquisition, the Company established a deferred tax liability of
approximately $81,000. Such amount has been recorded as an increase in the value
of the intangible license rights acquired.
In June 1994, the Company sold K-Tel Telecommunicacoes S/C Ltda. (K-Tel) to
Telcom Ventures, L.L.C., the Company's majority shareholder, for its book value
of approximately $199,000. This amount has been reported as a reduction in
additional paid-in capital within the accompanying consolidated financial
statements.
See accompanying notes to consolidated financial statements.
F-7
<PAGE> 76
WIRELESS VENTURES OF BRAZIL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
(1) DESCRIPTION OF OPERATIONS AND LIQUIDITY
Wireless Ventures of Brazil, Inc. (WVB), a Virginia corporation whose
majority stockholder is Telcom Ventures, L.L.C. (Telcom Ventures), a Delaware
limited liability company, was organized in August 1993 for the purpose of
pursuing wireless communications investment opportunities in Brazil. As of
December 31, 1995, WVB, through Brazilian licensee companies, holds licenses to
provide a class of mobile telecommunications services known as specialized
mobile radio (SMR) or trunking services in the 800 MHz frequency band in Brazil.
SMR services use radio frequencies to allow multiple subscribers to communicate
between remote portable or mobile radios.
As of December 31, 1995, WVB's subsidiaries held licenses for a total of
1,140 SMR channels in 23 cities in Brazil, including 195 channels in Sao Paulo,
and channels in Rio de Janeiro, Belo Horizonte, Curitiba, and Brasilia. The
initial term for such licenses is 15 years, although such licenses are issued at
the sole discretion of the Brazilian Ministry of Communications (the Ministry),
which can seek to cancel the Company's licenses at any time. In addition,
licensees are required by the Ministry to complete build-out of the channels and
loading of subscribers by a certain date. Failure to comply with the
requirements could result in the revocation of the licenses by the Ministry. At
December 31, 1995, WVB had several channels which had not been constructed and
loaded with subscribers within the specified timeframe. Although there can be no
assurance that the Ministry will not revoke these or any other licenses, the
management of WVB has either filed for extensions from the Ministry or has taken
other corrective action and believes the risk of loss of the licenses due to
noncompliance is remote.
In September 1994, WVB formed an indirect wholly owned subsidiary, a
Brazilian service company, AirLink Servicos e Comercio, Ltda. (AirLink). AirLink
holds no licenses, but owns equipment and, pursuant to service contracts,
provides technical support, billing, and other administrative functions to the
licensee companies in Brazil.
WVB and its subsidiaries (collectively, the Company) expect to expand their
operations through continued capital investment in current analog and future
digital technologies to create a national mobile telecommunications system in
Brazil. The Company currently is not generating sufficient cash flows from
operations to support its current operating and capital requirements. The
Company has and will continue to be dependent upon its stockholders to fund
these requirements. During 1995 and 1994, WVB's majority stockholder contributed
approximately $800,000 and $15,000,000, respectively to the Company.
Additionally, in 1995 WVB's majority stockholder provided approximately
$12,600,000 to the Company under a short-term unsecured note payable. Subsequent
to year-end, WVB borrowed an additional $3,000,000 under the note payable
agreement (see note 9). The Company's future profitability is dependent upon its
ability to further develop its existing system and successfully market its
mobile radio services in its primary Brazilian markets.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of WVB and its
direct and indirect wholly owned subsidiaries, Via Radio Administradora e
Participacoes Ltda. (VRA), Airfone Participacoes e Empreendimentos Ltda.
(Airfone), and AirLink, and its indirect 49 percent interest in Master-Tec
Telecomunicacoes Ltda. (Master-Tec), Telemobile-Telecomunicacoes Ltda.
(Telemobile) and Promobile-Telecomunicacoes Ltda. (Promobile). VRA wholly owns
seven Brazilian subsidiaries, the accounts of which are consolidated with the
accounts of the Company except as noted in the following paragraph. In addition,
Airfone wholly owns two Brazilian subsidiaries, the accounts of which are
consolidated with the accounts of the Company. WVB acquired indirect 49 percent
interests in Master-Tec, Telemobile, and Promobile, and has
F-8
<PAGE> 77
WIRELESS VENTURES OF BRAZIL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
the right to obtain the remaining 51 percent when it receives approval from the
Ministry at no additional cost to WVB. As WVB has effective control of these
three companies, the accounts of Master-Tec, Telemobile, and Promobile are
consolidated with the accounts of the Company. All significant intercompany
balances and transactions have been eliminated in consolidation.
On June 30, 1994, VRA sold its subsidiary, K-Tel Telecommunicacoes S/C,
Ltda. (K-Tel), to a related party (see note 4). The operations of K-Tel for the
six months ended June 30, 1994 have not been incorporated into the accompanying
consolidated financial statements.
Cash Equivalents
For purposes of the statement of cash flows, the Company considers all
highly liquid investments with original maturities of 3 months or less to be
cash equivalents. Cash equivalents consisted of approximately $3,686 and $2,460
in overnight investments and short-term deposits as of December 31, 1995 and
1994.
Inventory, Net
Inventory, which consists primarily of telecommunications equipment
(radios), is stated at the lower of cost or market. Cost is determined using the
first-in, first-out (FIFO) method. The inventory of the Company is subject to
rapid technological changes which could have an adverse financial impact on its
full realization in future periods.
Inventory at December 31, 1995 and 1994, includes approximately $786,000
and $328,000, respectively, in rental radios, that have been shipped to
customers under short-term rental agreements. Rental radios are depreciated
using the straight-line method over the estimated useful life of the radios,
which is 5 years.
Property and Equipment
Property and equipment are stated at cost. Depreciation is computed using
the straight-line method over the estimated useful lives of the assets which
range from 3 to 10 years. Depreciation on constructed assets, which include
radio towers and analog mobile radio systems, begins when the assets are
substantially completed and ready for their intended use.
For constructed assets, all costs necessary to bring such assets to the
condition and location necessary for their intended use are initially
capitalized as construction-in-progress and are subsequently transferred to
telecommunications equipment.
License Rights
License rights consist of licenses to operate channels for the provision of
SMR services in Brazil, which had been issued to the licensee companies acquired
(see notes 1 and 4). Amortization is calculated on the straight-line method over
15 years, the initial term of the licenses.
Intangible Assets
Intangible assets consist of the cost allocated to a covenant not to
compete associated with an acquisition. Amortization is calculated on the
straight-line method over 5 years, the term of the non-compete arrangement.
F-9
<PAGE> 78
WIRELESS VENTURES OF BRAZIL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
Revenue Recognition
The Company's principal sources of revenue are the provision of mobile
telecommunications services to businesses and individuals and the sale and
rental of telecommunications equipment (radios) to its service subscribers.
Service revenues consist of a usage fee based on the number of minutes the
subscriber uses the system each month (airtime revenues) plus a fixed monthly
service fee, which are recognized when the services are provided. Revenue for
equipment sales is recognized at the time the merchandise is shipped. Rental
revenue is recorded monthly over the term of each rental agreement.
Foreign Currency Translation
The Company accounts for translation of foreign currency in accordance with
Statement of Financial Accounting Standards No. 52, Foreign Currency
Translations (Statement No. 52). During the years ending December 31, 1995 and
1994, the Company's Brazilian operations were considered to be in a "highly
inflationary" economy, as such term is defined in Statement No. 52. Accordingly,
the Company uses the U.S. dollar as the functional currency. Therefore, certain
assets and liabilities are translated at historical exchange rates while other
assets and liabilities are translated at current exchange rates.
Income Taxes
The Company uses the asset and liability method to recognize deferred tax
assets and liabilities. Under the asset and liability method, deferred tax
assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to
be recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date.
ICMS and ISS Taxes
The provision of telecommunication services by the Company's Brazilian
subsidiaries are subject to ICMS taxes, a state level value-added tax (VAT)
levied at a rate of 25 percent. Non-telecommunication services provided by the
Brazilian subsidiaries are subject to ISS taxes, a municipal service tax levied
at rates of 5 percent or less depending on the Brazilian city in which the
services are provided. The Brazilian subsidiaries generate revenue which
encompass both aspects of telecommunication services and non-telecommunication
services. The management of the Company has adopted an allocation method for
segregating the revenue for tax reporting purposes. The allocation method
utilized by the Company could be subjected to review by the Brazilian tax
authorities and could be altered as result of such examination. Accordingly, the
Company could be assessed additional taxes by the Brazilian tax authorities. The
management of the Company periodically reviews its allocation method and accrues
additional reserves for taxes to alleviate such exposure. Management believes
that such assessments; if any, by the Brazilian taxing authorities would not
have a material impact on the financial statements.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist principally of trade accounts receivable.
The Company sells its products to commercial and individual customers in Brazil,
and extends credit, generally without requiring collateral. The Company monitors
its exposure for credit losses and maintains allowances for anticipated losses.
Since inception the Company has suffered significant credit losses, and these
losses could continue in the future.
F-10
<PAGE> 79
WIRELESS VENTURES OF BRAZIL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
Pervasiveness of Estimates
The preparation of the consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.
(3) PROPERTY AND EQUIPMENT
Property and equipment consists of the following at December 31, 1995 and
1994:
<TABLE>
<CAPTION>
1995 1994
----------- ----------
<S> <C> <C>
Telecommunications equipment........................ $ 8,502,834 $4,891,717
Furniture and equipment............................. 357,299 427,240
Computer equipment.................................. 402,622 321,136
Telephone lines..................................... 173,666 173,666
Construction-in-progress (see note 5)............... 910,445 910,445
Leasehold improvements.............................. 65,627 8,891
Vehicles............................................ 6,846 6,846
----------- ----------
10,419,339 6,739,941
Less accumulated depreciation and amortization...... (1,756,323) (293,395)
----------- ----------
$ 8,663,016 $6,446,546
========== =========
</TABLE>
(4) BUSINESS ACQUISITIONS
Acquisition of VR-1
In August 1993, the Company acquired 94 percent, and in July 1994, the
remaining 6 percent, of the capital stock of Via Radio-1 Telecommunicacoes,
S.A., (VR-1), which holds licenses to operate 20 SMR channels in the city of Sao
Paulo, Brazil. The acquisition has been accounted for using the purchase method
of accounting. Accordingly, the purchase price of approximately $743,000,
including acquisition costs, was allocated to assets and liabilities acquired
based on estimates of the fair values of the assets and liabilities as of the
acquisition date, with approximately $555,000 of the purchase price allocated to
the license rights acquired. Such intangible license rights have no basis for
income tax reporting purposes in Brazil thus giving rise to a deferred tax
liability of approximately $454,000, which amount was allocated as an increase
in the value of the license rights acquired (see note 6).
In conjunction with the initial acquisition, in consideration for a
covenant not to compete with the Company for a 5 year period, the Company paid
the former shareholders $250,000. This amount has been included in intangible
assets within the accompanying consolidated financial statements. In November
1994, the ownership of VR-1 was transferred from WVB to VRA.
Acquisition of VRA
In October 1993, WVB, through a holding company, acquired all the
outstanding capital stock of VRA and the four Brazilian subsidiaries that it
then substantially wholly owned. The acquisition has been accounted for using
the purchase method of accounting. The purchase price of approximately
$3,477,000, including acquisition costs, was allocated to the licenses for 80
SMR channels held by VRA's four Brazilian subsidiaries, which have no basis for
income tax reporting purposes in Brazil. Accordingly, the Company established a
F-11
<PAGE> 80
WIRELESS VENTURES OF BRAZIL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(4) BUSINESS ACQUISITIONS -- (CONTINUED)
deferred tax liability in connection with this acquisition totaling
approximately $2,845,000 (see note 6). Such amount was allocated as an increase
in the value of the license rights acquired.
In November 1993, VRA acquired all of the outstanding capital stock of two
commonly controlled Brazilian companies, K-Tel and ATG Telecommunicacoes e
Comercio, Ltda. (ATG), and its 70 percent owned subsidiary, Radio
Telecommunicacoes do Brazil, Ltda. (Radio-Telecom). ATG holds licenses to
operate 140 SMR channels for the provision of SMR services in Sao Paulo and
several nearby cities. K-Tel held no licenses, but provided equipment, technical
support, and other administrative functions to approximately 2,300 subscribers
as of the acquisition date. The acquisition has been accounted for using the
purchase method of accounting and, accordingly, the purchase price of
approximately $10,300,000 for both companies was allocated to assets and
liabilities acquired based on estimates of fair values as of the date of
acquisition, with approximately $9,021,000 and $1,080,000 of the purchase price
allocated to the ATG license rights and certain telecommunications equipment
maintained by ATG, respectively, with the remaining $199,000 allocated to the
net assets of K-Tel. The intangible license rights acquired have no basis for
income tax reporting purposes in Brazil thus giving rise to deferred tax
liabilities of $8,021,000 (see note 6). Such amounts were allocated as an
increase in the value of the license rights acquired.
In July 1994, VRA acquired the remaining 30 percent of capital stock of
Radio-Telecom for approximately $99,000. The purchase price and the value of
deferred tax liabilities assumed of approximately $81,000 were allocated to the
intangible license rights acquired.
On June 30, 1994, the Company sold all the outstanding shares of capital
stock of K-Tel to Telcom Ventures, the Company's majority shareholder, for its
book value of approximately $199,000. This amount has been reported as a
reduction in additional paid-in capital within the accompanying consolidated
financial statements. The operating activities of K-Tel from the acquisition
date through June 30, 1994, the date of disposition to Telcom Ventures, have not
been included within the accompanying consolidated financial statements.
In connection with the acquisition, the Company became aware of certain tax
contingencies which arose prior to the acquisition. Based on discussion with
legal counsel, management of the Company believes that the probability of a
material impact on the financial statements is remote.
Acquisition of Airfone
In July 1994, the Company indirectly acquired all the outstanding capital
stock of Airfone, which, in turn, held all of the outstanding capital stock of
Airfone Comercio e Servicos de Radiofonia, Ltda. and SOW Comercio e Servicos de
Radiofonia, Ltda. (collectively, the Airfone Affiliates), in exchange for 11.43
percent of the issued and outstanding shares of WVB, the value of which was
determined to be approximately $2,084,000, and the sum of approximately
$5,470,000 in additional purchase price. At the date of acquisition, the Company
had a note receivable of $5,000,000 plus accrued interest of $177,000 due from
the principal stockholders of Airfone. This amount was offset against the
purchase price. The remaining balance of the purchase price of approximately
$293,000 was paid in 1995. The Airfone Affiliates are Brazilian corporations,
which, directly or indirectly, hold licenses to operate a total of 280 SMR
channels in several Brazilian cities.
The acquisition has been accounted for using the purchase method of
accounting. Accordingly, the purchase price totaling approximately $7,555,000,
was allocated to assets and liabilities acquired based on estimates of the fair
values of the assets and liabilities as of the acquisition date, with
approximately $8,161,000 of the purchase price allocated to the license rights
acquired, approximately $566,000 allocated to telecommunications equipment,
accounts receivable and other current assets acquired, and approximately
$1,172,000 allocated to the liabilities assumed. The intangible license rights
acquired have no basis for income
F-12
<PAGE> 81
WIRELESS VENTURES OF BRAZIL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(4) BUSINESS ACQUISITIONS -- (CONTINUED)
tax reporting purposes in Brazil thus giving rise to deferred tax liabilities of
approximately $6,400,000 (see note 6). Such amount has been allocated as an
increase in the license rights acquired.
Acquisition of Interest in Master-Tec
In September 1994, the Company indirectly acquired 49 percent of the
capital stock of Master-Tec for $3,000,000 with an option to acquire the
remaining 51 percent interest for no additional purchase price. Master-Tec is a
Brazilian corporation which holds licenses to operate 100 SMR channels in
several major cities in Brazil. The acquisition has been accounted for using the
purchase method of accounting. Accordingly, the purchase price was allocated to
the licenses for the 100 SMR channels held by Master-Tec. Additionally, the
Company established a deferred tax liability in connection with the acquisition
in the amount of approximately $2,455,000 (see note 6), since the license rights
acquired have no basis for tax reporting purposes in Brazil. Such amount has
been allocated as an increase in the license rights acquired.
Acquisition of Interest in Telemobile and Promobile
In November 1994, the Company entered into an agreement to purchase 49
percent of the capital stock of Telemobile and Promobile for a total of
approximately $6,782,000 with an option to acquire the remaining 51 percent for
no additional purchase price. Prior to December 31, 1994, $3,000,000 of such
purchase price was paid. Telemobile and Promobile collectively hold licenses to
operate 540 channels for the provision of trunking services in Brazil. The
remaining balance of the purchase price of $3,782,000 is included in current
liabilities within the accompanying 1994 consolidated financial statements. Of
the remaining balance, $2,782,000 was paid in 1995, and the Company expects the
remaining amount of $1,000,000 to be paid prior to December 31, 1996.
The acquisition of Telemobile and Promobile has been accounted for using
the purchase method of accounting. Accordingly, the purchase price was allocated
to the licenses for the 540 channels held by Telemobile and Promobile.
Additionally, the Company established a deferred tax liability in connection
with the acquisition in the amount of approximately $5,549,000 (see note 6)
since the license rights acquired have no basis for tax reporting purposes in
Brazil. Such amount has been allocated as an increase in the license rights
acquired.
(5) RELATED PARTY TRANSACTIONS
In 1994, LCC, L.L.C. (LCC), an affiliate of Telcom Ventures, performed
design engineering services to develop the Company's mobile radio communications
system in Brazil. Systems development activities included development of terrain
databases, channel loading, preliminary site design, initial frequency planning,
and candidate site evaluation. The cost of such services for the year ended
December 31, 1994, which was paid by the Company's majority shareholder, Telcom
Ventures, on behalf of the Company, amounted to $910,445 and has been included
in construction-in-progress with a corresponding increase in additional paid-in
capital within the accompanying consolidated financial statements.
During 1995 and 1994, Telcom Ventures paid certain expenses including
salaries, travel, consulting fees, and overhead expenses totaling $747,450 and
$811,809, respectively, on behalf of the Company. These amounts have been
reported as selling, general and administrative expenses with a corresponding
increase in additional paid-in capital within the accompanying consolidated
financial statements. During 1994, Telcom Ventures also purchased certain
telecommunication equipment and inventory totaling $472,451 on behalf of the
Company. This amount has been reported as an increase in additional paid-in
capital within the accompanying consolidated financial statements.
F-13
<PAGE> 82
WIRELESS VENTURES OF BRAZIL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(5) RELATED PARTY TRANSACTIONS -- (CONTINUED)
In October 1994, LCC licensed its software to the Company for $200,000 per
year over the next five years. The Company's management intends to use such
software to aid in the development of a digital mobile radio communications
system. In March 1996, the software license agreement was amended to make the
software license fee a total of $200,000 for the period commencing October 21,
1994 until December 31, 1997. Accordingly, the license fee of $200,000, which is
due in four installments from June 1996 to December 1996, has been included in
telecommunications equipment and due to affiliates within the accompanying
consolidated financial statements, and is being amortized using the straight
line method over the three year license period. Amortization expense associated
with this software was $24,000 and $50,000 for the years ended December 31, 1995
and 1994, respectively.
During 1994, K-Tel made certain payments on behalf of the Company totaling
$385,945. Upon the sale of K-Tel to Telcom Ventures in June 1994, and the
subsequent sale of K-Tel to a related third party in December 1994, K-Tel
forgave this debt. This amount has been reported as additional paid-in capital
within the accompanying consolidated financial statements.
Prior to the Company's acquisition of Airfone, the former owners of Airfone
made certain payments on behalf of the Company totaling $319,730. In December
1994, $133,193 of such debt was forgiven. Accordingly, this amount has been
reported as additional paid-in capital within the accompanying consolidated
financial statements. At December 31, 1995 and 1994, the Company had recorded a
payable to such individuals in the amount of $194,603 and $186,538,
respectively. These amounts are included in due to affiliates within the
accompanying consolidated financial statements.
In December 1994, the Company acquired certain telecommunications equipment
from K-Tel prior to its sale to a third party. The purchase price for the
equipment of $10,000 is included in due to affiliates within the accompanying
consolidated financial statements.
(6) INCOME TAXES
WVB is subject to corporate tax in the United States of America (U.S.) on
its net annual earnings generated in the U.S. and distributions from its
Brazilian subsidiaries. WVB's direct and indirect Brazilian subsidiaries are
separately obligated for Brazilian taxes on their annual earnings.
Income tax benefit consists of the following at December 31, 1995 and 1994:
<TABLE>
<CAPTION>
CURRENT DEFERRED TOTAL
-------- ----------- -----------
<S> <C> <C> <C>
1995:
U.S. federal........................ $ -- $ -- $ --
Brazilian federal................... -- (8,693,505) (8,693,505)
-------- ----------- -----------
$ -- $(8,693,505) $(8,693,505)
======== ========== ==========
1994:
U.S. federal........................ $200,000 $ -- $ 200,000
Brazilian federal................... -- (2,164,204) (2,164,204)
-------- ----------- -----------
$200,000 $(2,164,204) $(1,964,204)
======== ========== ==========
</TABLE>
F-14
<PAGE> 83
WIRELESS VENTURES OF BRAZIL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(6) INCOME TAXES -- (CONTINUED)
Income tax benefit was $8,693,505 and $1,964,204 for the years ended
December 31, 1995 and 1994, respectively and differed from the amount computed
by applying the U.S. federal income tax rate of 34 percent as a result of the
following:
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Computed expected tax benefit.............................. $(4,666,572) $(2,380,707)
Increase (reduction) in income taxes resulting from:
Change in beginning of the year balance of the
valuation allowance for deferred tax assets......... 1,537,129 477,527
Taxation of earnings of Brazilian subsidiaries deemed
remitted to WVB..................................... -- 462,000
Effect of differential between U.S. federal and
Brazilian income taxes and changes in enacted tax
rates of Brazil..................................... (5,564,062) (523,024)
----------- -----------
$(8,693,505) $(1,964,204)
========== ==========
</TABLE>
The significant components of the U.S. and Brazilian deferred tax benefit
are as follows for the years ended December 31, 1995 and 1994:
<TABLE>
<CAPTION>
U.S. BRAZILIAN TOTAL
-------- ----------- -----------
<S> <C> <C> <C>
1995:
Deferred tax benefit (exclusive of the
effects of other components listed
(below).............................. $(12,682) $(2,639,365) $(2,652,047)
Increase in beginning of the year
balance of the valuation allowance
for deferred tax assets.............. 12,682 1,524,447 1,537,129
Effects of enacted changes in tax rates
of Brazil............................ -- (7,578,587) (7,578,587)
-------- ----------- -----------
$ -- $(8,693,505) $(8,693,505)
======== ========== ==========
1994:
Deferred tax benefit (exclusive of the
effects of other components listed
below)............................... $(13,707) $(1,537,500) $(1,551,207)
Increase in beginning of the year
balance of the valuation allowance
for deferred tax assets.............. 13,707 463,820 477,527
Amortization of intangible license
rights related to deferred tax
liabilities established in connection
with
acquisitions......................... -- (1,090,524 (1,090,524)
-------- ----------- -----------
$ -- $(2,164,204) $(2,164,204)
======== ========== ==========
</TABLE>
F-15
<PAGE> 84
WIRELESS VENTURES OF BRAZIL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(6) INCOME TAXES -- (CONTINUED)
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and liabilities at December 31, 1995 and
1994 are presented below:
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards...................... $ 2,198,357 $ 1,789,739
Deferred assets....................................... 48,116 217,197
Due from affiliate.................................... 414,872 86,138
Fixed assets depreciation and amortization............ 73,046 3,986
Accounts receivable................................... 468,552 45,000
Accounts payable...................................... 169,014 --
Noncompete agreement.................................. 26,389 13,707
----------- -----------
Total gross deferred tax assets....................... 3,398,346 2,155,677
Less valuation allowance.............................. 2,014,656 477,527
----------- -----------
Net deferred tax assets.................................... 1,383,690 1,678,150
----------- -----------
Deferred tax liabilities:
Intangible license rights............................. 15,725,1000 25,111,629
Accounts receivable................................... 48,928 --
Inventory............................................. 21,037 26,519
Due to affiliate...................................... 414,872 59,754
----------- -----------
Total gross deferred tax liabilities....................... 16,209,937 25,197,902
----------- -----------
Net deferred tax liabilities............................... $14,826,247 $23,519,752
========== ==========
</TABLE>
The valuation allowance for deferred tax assets as of January 1, 1995 and
1994, was $477,527 and $342,793, respectively. The net change in the total
valuation allowance for the years ended December 31, 1995 and 1994, was an
increase of $1,537,129 and $134,734, respectively.
(7) OFFICE FACILITIES AND OTHER LEASES
The Company has operating leases for office space in Sao Paulo, as well as
tower sites throughout Brazil. Rental expense for the office and other operating
leases was approximately $850,000 and $190,000 during the years ended December
31, 1995 and 1994.
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31:
------------------------------------------------------------------------
<S> <C>
1996.................................................................... $ 655,000
1997.................................................................... 222,000
1998.................................................................... 171,000
1999.................................................................... 162,000
2000.................................................................... 94,000
----------
Total minimum lease payments............................................ $1,304,000
=========
</TABLE>
F-16
<PAGE> 85
WIRELESS VENTURES OF BRAZIL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(7) OFFICE FACILITIES AND OTHER LEASES -- (CONTINUED)
Future minimum lease payments under operating leases as of December 31,
1995, calculated using the exchange rate at December 31, 1995, of R$.972 to US
$1, are approximately as follows:
(8) BANK LOANS PAYABLE
The Company utilizes various short-term borrowing arrangements with
financial institutions in Brazil as a method of financing current operations.
The Company had bank loan payables as of December 31, 1995 and 1994,
respectively, as follows:
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Short-term notes payable........................................ $337,253 $355,167
Discounted accounts receivable.................................. 314,302 --
Bank overdrafts................................................. 155,364 42,280
-------- --------
$806,919 $397,447
======== ========
</TABLE>
At December 31, 1995, short-term notes payable consisted of three unsecured
loans from financial institutions in Brazil, due on various dates in January
1996 and carrying interest at rates varying from 4.8 percent to 5.1 percent per
month. All principal and interest was repaid in full on the due dates. At
December 31, 1994, short-term notes payable consisted of two unsecured loans
from financial institutions in Brazil carrying interest at rates varying from
9.8 percent to 12.0 percent per month. These loans were repaid during 1995.
At December 31, 1995, the Company had an outstanding bank loan in the
amount of $314,302 from a financial institution in Brazil. This note was
collateralized by discounting with recourse an equal amount of the Company's
trade accounts receivable. The Company must pay a discount rate of 4.5 percent
per month on the outstanding balance. During 1996, the Company has continued to
discount portions of its trade accounts receivable to obtain short-term
financing.
At December 31, 1995, the Company had bank overdrafts of $155,364. At
December 31, 1994, the Company had obtained a bank overdraft facility from a
financial institution in Brazil in the amount of $42,280. This note was
unsecured and carried interest at the rate of 8 percent per month and was repaid
during 1995.
(9) SHORT-TERM NOTE PAYABLE TO MAJORITY STOCKHOLDER
At December 31, 1995, the Company has a revolving unsecured promissory note
payable to its majority stockholder, Telcom Ventures, in the amount of
$12,559,670. The note bears interest at the rate of 9 percent per annum and
principal and interest are due on demand. During 1995, the Company recognized
interest expense of $671,020 related to this note payable. The note can be
converted to shares of capital stock of WVB at the option of the noteholder. As
of May 31, 1996, the Company had borrowed an additional $3,051,538 against the
promissory note.
(10) PURCHASE OF AUGUSTUS AND MULTIPONTO
In September 1995, the Company entered into a purchase agreement with
Augustus Administracao e Participacoes S.A. (Augustus) to purchase its 100 SMR
channels in Brazil. The total purchase price is approximately $408,000. Once the
Ministry has approved transfer of control of the SMR licenses from Augustus to
the Company, the purchase price will become due and payable.
In September 1995, the Company entered into a purchase agreement with
Multiponto Telecomunicacoes, Ltda. (Multiponto) to purchase its 200 SMR channels
in Brazil. The total purchase price is
F-17
<PAGE> 86
WIRELESS VENTURES OF BRAZIL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(10) PURCHASE OF AUGUSTUS AND MULTIPONTO -- (CONTINUED)
approximately $856,800. Once the Ministry has approved transfer of control of
the SMR licenses from Multiponto to the Company, the purchase price will become
due and payable.
These transactions will be reflected in the financial statements on
approval from the Ministry. The Company expects to receive approval for both
transfers from the Ministry by December 31, 1996.
(11) FAIR VALUE OF FINANCIAL INSTRUMENTS
The following table presents the carrying amounts and estimated fair values
of the Company's financial instruments at December 31, 1995 and 1994. FASB
Statement No. 107, Disclosure about Fair Value of Financial Instruments, defines
the fair value of a financial instrument as the amount at which the instrument
could be exchanged in a current transaction between willing parties:
<TABLE>
<CAPTION>
1995 1994
------------------------- ------------------------
CARRYING FAIR CARRYING FAIR
AMOUNTS VALUE AMOUNTS VALUE
----------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Financial assets:
Cash and cash equivalents....... $ 62,447 $ 62,447 $ 572,005 $ 572,005
Trade accounts receivable....... 3,129,357 3,129,357 228,767 228,767
Due from officers and
employees..................... 35,809 35,809 59,271 59,271
Other accounts receivable....... 464,432 464,432 120,409 120,409
Financial liabilities:
Trade accounts payable and
accrued....................... 7,155,050 7,155,050 3,595,382 3,595,382
Bank loans payable.............. 806,919 806,919 397,447 397,447
Other short-term payables....... 1,000,000 1,000,000 4,074,648 4,074,648
Due to affiliates............... 404,603 404,603 396,538 396,538
Short-term note payable to
majority stockholder.......... 12,559,670 -- -- --
</TABLE>
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments:
Cash and cash equivalents, trade accounts receivables, due from
officers and employees, other accounts receivable, trade accounts payable,
bank loans payable, due to affiliates, and other short-term payables: the
carrying amounts approximate fair values because of the short maturity of
those instruments.
Short-term note payable to majority stockholder: It is not practicable
to estimate the fair value since the note payable is due to the majority
stockholder, and although the repayment term is due on demand, the actual
timing of repayment is uncertain.
(12) COMMON STOCK
Stock Split
On August 16, 1994, the Articles of Incorporation of WVB were amended to
increase the authorized capital from 10,000 to 1,000,000 shares of common stock
with the stated par value remaining at $.01 per share. At the same time, WVB
effected a one hundred for one stock split whereby each outstanding share of
common stock was subdivided and reclassified into 100 shares of common stock.
F-18
<PAGE> 87
WIRELESS VENTURES OF BRAZIL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(12) COMMON STOCK -- (CONTINUED)
Stock Options
The Company has entered into individual stock option agreements with
certain employees of the Company and an affiliated company. These agreements
allow for such individuals to purchase a total of 1,303 shares, or approximately
2 percent, of the common stock of the Company at an exercise price equal to a
pro rata share of the total capital contribution per share on the option
exercise date, which management believes approximates market value. At December
31, 1995, the per share capital contribution was approximately $428. The
agreements expire in November 1996 and April 1997. As of December 31, 1995, both
options were exercisable and neither had been exercised.
(13) STOCK GRANT
In January 1995, the Company entered into an agreement with an employee of
Telcom Ventures, whereby the Company granted such employee 31 shares of common
stock of WVB. The Company recognized compensation expense in the amount of
$12,500, which management believes approximates fair value of the shares
granted. This amount has been reported as selling, general, and administrative
expenses with a corresponding increase in additional paid-in capital within the
accompanying consolidated financial statements.
(14) SUBSEQUENT EVENTS
In May 1996, WVB entered into a purchase agreement to acquire the
outstanding capital stock of LMP Consultoria Representcoes Ltd. (LMP) for
$900,000. LMP holds licenses to operate 220 SMR channels in Brazil. By
agreement, payment of one-half of the purchase price is due upon WVB building
out the channels and the balance is due upon obtaining approval from the
Ministry for the transfer of control of the SMR licenses.
In May 1996, WVB entered into a purchase agreement to acquire the
outstanding capital stock of Telecomunicacoes Brastel S/C Ltd. (Brastel) for
$240,000. Brastel holds licenses to operate 40 SMR channels in Brazil. WVB paid
$50,000 of the purchase price upon signing the agreement. The remainder of the
purchase price is due upon WVB building out the channels and obtaining approval
from the Ministry for the transfer of control of the SMR licenses.
(15) PENDING SALE OF THE COMPANY
In June 1996, the stockholders of WVB entered into a preliminary agreement
to sell all of the outstanding capital stock of the Company to a U.S. publicly
traded company. Pursuant to the agreement, the shareholders of WVB would receive
common stock of the purchaser as consideration for the sale. The negotiations
are in the preliminary stages, and therefore, are subject to the completion of
due diligence procedures by the purchaser.
F-19
<PAGE> 88
WIRELESS VENTURES OF BRAZIL, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
SEPTEMBER 30,
1996
-------------
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents................................................. $ 5,461
Trade accounts receivable, net............................................ 4,305,636
Other accounts receivable................................................. 627,710
Prepaid expenses and other current assets................................. 450,850
Inventory................................................................. 2,053,158
-------------
Total current assets................................................. 7,442,815
-------------
Property and equipment, net.................................................... 8,177,247
License rights, net............................................................ 48,734,576
Intangible assets, net......................................................... 113,156
Other assets................................................................... 80,794
-------------
Total assets......................................................... $ 64,548,588
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses..................................... $ 9,137,504
Bank loans payable........................................................ 1,139,276
Other payables............................................................ 2,275,071
Amounts payable for business acquisitions................................. 1,140,000
Short-term note payable to majority stockholder........................... 16,563,004
Deferred income taxes..................................................... 403,882
-------------
Total current liabilities................................................. 30,658,737
Other.......................................................................... 1,213,944
Deferred income taxes.......................................................... 13,052,618
-------------
Total liabilities.................................................... 44,925,299
-------------
Stockholders' equity........................................................... 19,623,289
-------------
Total liabilities and stockholders' equity................................ $ 64,548,588
=============
</TABLE>
See accompanying notes to condensed consolidated financial statements
F-20
<PAGE> 89
WIRELESS VENTURES OF BRAZIL, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
------------------------------
SEPTEMBER 30, SEPTEMBER 30,
1996 1995
------------- -------------
<S> <C> <C>
Revenues.......................................................... $ 10,909,129 $ 6,463,744
Cost of operations................................................ 5,933,029 4,682,299
------------- -------------
Gross profit...................................................... 4,976,100 1,781,445
Selling, general, and administrative expenses..................... 10,960,700 7,390,985
Depreciation and amortization expense............................. 3,697,106 3,691,352
------------- -------------
Operating loss.................................................... (9,681,706) (9,300,892)
Other expenses, net............................................... (1,066,797) (238,544)
------------- -------------
Loss before income tax benefit.................................... (10,748,503) (9,539,436)
Income tax benefit................................................ 1,369,747 461,142
------------- -------------
Net loss.......................................................... $ (9,378,756) $ (9,078,294)
============= ============
</TABLE>
See accompanying notes to condensed consolidated financial statements
F-21
<PAGE> 90
WIRELESS VENTURES OF BRAZIL, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
------------------------------
SEPTEMBER 30, SEPTEMBER 30,
1996 1995
------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net loss...................................................... $ (9,378,756) $ (9,078,294)
Depreciation and amortization expense......................... 3,697,106 3,691,352
Provision for doubtful accounts............................... 2,181,747 1,120,164
Deferred tax benefit.......................................... (1,369,747) (461,142)
Stock grant................................................... -- 12,500
Changes in operating accounts, net............................ 1,691,273 (3,111,523)
------------ -------------
Net cash used by operating activities.................... (3,178,377) (7,826,943)
------------ -------------
Cash flows from financing activities:
Purchase of property and equipment............................ (306,743) (2,543,149)
Acquisition of licensee companies, net of cash acquired....... (1,000,000) (3,074,648
------------ -------------
Net cash used by investing activities.................... (1,306,743) (5,617,797)
------------ -------------
Cash flows from financing activities:
Proceeds from sale of stock and net capital contributions..... 92,443 2,017,731
Proceeds from note payable to majority stockholder............ 4,003,334 11,240,637
Proceeds from bank loans payable.............................. 332,357 --
Payments on bank loans payable................................ -- (302,253)
------------ -------------
Net cash provided by financing activities................ 4,428,134 12,956,115
------------ -------------
Net decrease in cash and cash equivalents.......................... (56,986) (488,625)
Cash and cash equivalents at beginning of year..................... 62,447 572,005
------------ -------------
Cash and cash equivalents at end of year........................... $ 5,461 $ 83,380
============ ============
Supplemental disclosures of cash flow information:
Interest paid................................................. $ 720,485 $ 120,778
============ ============
</TABLE>
See accompanying notes to condensed consolidated financial statements
F-22
<PAGE> 91
WIRELESS VENTURES OF BRAZIL, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
(1) BASIS OF PRESENTATION
In the opinion of management, the accompanying unaudited condensed
financial statements reflect all adjustments, consisting of only normal
recurring accruals, necessary for a fair presentation of the consolidated
financial position of Wireless Ventures of Brazil, Inc. and Subsidiaries (the
"Company" or WVB) as of September 30, 1996, and the results of its operations
and cash flows for the nine months ended September 30, 1996 and 1995. The
results of operations for the nine months ended September 30, 1996 and 1995 are
not necessarily indicative of the results that may be expected for the full
year. These condensed financial statements are unaudited, and do not include all
related footnote disclosures.
The interim unaudited condensed financial statements should be read in
conjunction with the audited financial statements of the Company.
(2) BUSINESS ACQUISITIONS
In May 1996, WVB agreed to acquire all of the outstanding capital stock of
LMP Consultoria Representcoes Ltda. (LMP) for a total purchase price of
$900,000. LMP holds licenses to operate a total of 220 SMR channels in Brazil.
Pursuant to the purchase agreement executed in July 1996, WVB has acquired 49%
of the stock of LMP and the right to purchase the remaining 51% for nominal
additional consideration. As of September 30, 1996, WVB had paid one-half of the
total purchase price for this transaction, with the balance payable upon the
receipt of the approval of the Ministry for the transfer of control.
In May 1996, WVB agreed to acquire all of the outstanding capital stock of
Telecomunicacoes Brastel S/C Ltda. (Brastel) for a total purchase price of
$240,000. Brastel holds licenses to operate 40 SMR channels in Brazil. Pursuant
to the purchase agreement, WVB acquired 49% of the stock of Brastel and the
right to purchase the remaining 51% for nominal additional consideration. As of
September 30, 1996, WVB had paid $50,000 of the total purchase price for this
transaction. In October 1996, WVB paid an additional $70,000 of the purchase
price for this transaction. Another $60,000 of the balance is payable by
December 10, 1996 with the remaining balance payable upon the receipt of the
approval of the Ministry for the transfer of control.
(3) PENDING SALE OF COMPANY
As of October 28, 1996, WVB entered into a merger agreement with Nextel
Communications, Inc. (Nextel) pursuant to which Nextel would acquire 81% of the
issued and outstanding capital stock of WVB in exchange for $186,300,000 worth
of Nextel common stock in a tax-free reorganization. Under the merger agreement,
which is subject to WVB stockholder approval, the existing WVB stockholders will
retain the remaining 19% of WVB. The merger agreement contemplates that the WVB
stockholders will also approve the reclassification of the WVB common stock into
two classes with different voting rights. Nextel will acquire 100% of the Class
A common stock, which will give it 90% of the voting rights of the WVB
stockholders.
F-23
<PAGE> 92
ANNEX A
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
NEXTEL COMMUNICATIONS, INC.,
DIAL CALL INDIMICH, INC.
AND
WIRELESS VENTURES OF BRAZIL, INC.
DATED AS OF OCTOBER 28, 1996
AS AMENDED AS OF DECEMBER 19, 1996
<PAGE> 93
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I DEFINITIONS................................................................. 2
1.1 Defined Terms.............................................................. 2
1.2 Other Definitional Matters................................................. 7
ARTICLE II THE MERGER................................................................. 7
2.1 The Merger................................................................. 7
2.1.1 The Merger of Indimich and WVB................................... 7
2.1.2 Effective Time of the Merger..................................... 7
2.1.3 Articles of Incorporation........................................ 8
2.1.4 Bylaws........................................................... 8
2.1.5 Officers and Directors of Surviving Corporation.................. 8
2.1.6 Effects of Merger................................................ 8
2.2 Conversion of Shares....................................................... 8
2.2.1 Effect of Merger on Capital Stock................................ 8
2.2.2 Exchange of Certificates......................................... 9
2.2.3 Dissenters' Rights............................................... 10
2.3 Closing.................................................................... 10
2.4 Unavailable Channels....................................................... 10
2.4.1 Options to Purchase Equity Interests in Licensees................ 10
2.4.2 Frequency Interference........................................... 11
2.4.3 Revocation of Licenses........................................... 12
2.4.4 Liability........................................................ 13
2.5 Closing Balance Sheet...................................................... 13
2.6 Service of Process......................................................... 15
2.7 Tax Treatment of Adjustments............................................... 15
ARTICLE III REPRESENTATIONS AND WARRANTIES OF WVB..................................... 15
3.1 Organization, Good Standing, Etc........................................... 15
3.2 Authorization, Due Execution and Binding Effect............................ 15
3.3 No Approvals or Notices Required; No Conflicts With Instruments............ 16
3.4 Licenses, Permissions, Permits, Authorizations, Etc........................ 16
3.5 Capitalization of WVB and WVB Affiliates................................... 17
3.6 Ownership of WVB Common Stock and Capital Stock of WVB Affiliates.......... 17
3.7 Financial Statements....................................................... 17
3.7.1 General.......................................................... 17
3.7.2 Interim Financial Statements..................................... 18
3.8 Absence of Certain Changes................................................. 18
3.9 Liabilities................................................................ 19
3.10 Intercompany Transactions.................................................. 20
3.11 Taxes...................................................................... 20
3.12 Assets..................................................................... 20
3.13 Channels................................................................... 21
3.14 Compliance With Environmental Laws......................................... 21
3.15 Contracts.................................................................. 22
3.16 Claims and Legal Proceedings............................................... 22
3.17 Interconnect Rights........................................................ 23
3.18 Labor Matters.............................................................. 23
3.19 Patents, Trademarks, Etc................................................... 24
3.20 Customers.................................................................. 25
</TABLE>
-i-
<PAGE> 94
<TABLE>
<S> <C>
3.21 Applicable Laws............................................................ 25
3.22 Insurance.................................................................. 26
3.23 Brokerage.................................................................. 26
3.24 Business Plan.............................................................. 26
3.25 S-4 Registration Statement and Proxy Statement/Prospectus.................. 26
3.26 Full Disclosure............................................................ 26
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF NEXTEL AND INDIMICH...................... 27
4.1 Organization, Good Standing, Etc........................................... 27
4.2 Authorization, Due Execution and Binding Effect............................ 27
4.3 No Approvals or Notices Required; No Conflicts With Instruments............ 27
4.4 Claims and Legal Proceedings............................................... 28
4.5 Nextel SEC Filings......................................................... 28
4.6 Nextel Common Stock........................................................ 28
4.7 Brokerage.................................................................. 28
4.8 S-4 Registration Statement and Proxy Statement/Prospectus.................. 28
4.9 Tax........................................................................ 29
ARTICLE V FURTHER AGREEMENTS.......................................................... 30
5.1 Schedules.................................................................. 30
5.2 Access..................................................................... 30
5.3 Management Information..................................................... 30
5.4 Advice of Claims........................................................... 31
5.5 Conduct of the Business.................................................... 31
5.6 Compliance With Laws....................................................... 32
5.7 Insurance and Loss of or Damage to Assets.................................. 32
5.8 Confidentiality............................................................ 32
5.9 Founders Meeting........................................................... 32
5.10 Registration Statement/Proxy Materials..................................... 33
5.11 No Solicitations........................................................... 33
5.12 Rule 145 Affiliates........................................................ 34
5.13 Tax Covenant............................................................... 35
5.14 Nextel Common Stock........................................................ 35
5.15 Other Cooperation.......................................................... 36
5.16 Certain Brazilian Regulatory Issues........................................ 36
5.17 Brazilian Certificates..................................................... 37
ARTICLE VI CONDITIONS PRECEDENT TO OBLIGATIONS OF NEXTEL AND INDIMICH................. 37
6.1 Accuracy of Representations and Warranties................................. 37
6.2 Performance of Agreement................................................... 37
6.3 Approvals and Consents..................................................... 37
6.4 Founders' Approval......................................................... 37
6.5 Shareholders Agreement..................................................... 38
6.6 Opinion of WVB Counsel..................................................... 38
6.7 Confidentiality, Noncompetition and Proprietary Information Agreements..... 38
6.8 Resignations of Directors, Officers, Employees, Independent Contractors and
Consultants................................................................ 38
6.9 Legal Proceedings.......................................................... 38
6.10 S-4 Registration Statement and Listing..................................... 38
6.11 Title...................................................................... 39
6.12 WVB Officers' Certificates................................................. 39
6.13 No Change in Political or Economic Conditions in Brazil.................... 39
</TABLE>
-ii-
<PAGE> 95
<TABLE>
<S> <C>
6.14 Affiliate Transactions..................................................... 39
6.15 Rule 145 Affiliate Agreements.............................................. 39
6.16 Documentation Relating to Licenses......................................... 39
6.17 Negative Pledge Agreement.................................................. 39
6.18 Brazilian Regulatory Issues................................................ 40
ARTICLE VII CONDITIONS PRECEDENT TO OBLIGATIONS OF WVB................................ 40
7.1 Accuracy of Representations and Warranties................................. 40
7.2 Performance of Agreement................................................... 40
7.3 Approvals and Consents..................................................... 40
7.4 Founders' Approval......................................................... 40
7.5 Shareholders Agreement..................................................... 40
7.6 Nextel and Indimich Officers' Certificate.................................. 41
7.7 Legal Proceedings.......................................................... 41
7.8 S-4 Registration Statement and Listing..................................... 41
7.9 Opinion of Nextel Counsel.................................................. 41
7.10 No Material Adverse Change................................................. 41
7.11 Transfer of Interests of WVB Affiliates.................................... 41
7.12 Termination of Powers of Attorney.......................................... 42
ARTICLE VIII NONCOMPETITION........................................................... 42
8.1 Noncompetition............................................................. 42
8.2 Specific Performance....................................................... 43
ARTICLE IX INDEMNIFICATION AND SURVIVAL OF WARRANTIES................................. 43
9.1 Indemnification by the Founders............................................ 43
9.2 Indemnification by Nextel.................................................. 44
9.3 Procedure.................................................................. 44
9.4 Survival................................................................... 45
ARTICLE X TERMINATION................................................................. 45
10.1 Termination................................................................ 45
10.2 Effect of Termination...................................................... 46
ARTICLE XI GENERAL.................................................................... 47
11.1 Expenses................................................................... 47
11.2 Amendment.................................................................. 47
11.3 Headings................................................................... 47
11.4 Applicable Law............................................................. 47
11.5 Parties in Interest........................................................ 47
11.6 Waivers.................................................................... 48
11.7 Acknowledgment............................................................. 48
11.8 Notices.................................................................... 48
11.9 Counterparts............................................................... 49
11.10 Entire Understanding........................................................ 50
</TABLE>
-iii-
<PAGE> 96
SCHEDULES
<TABLE>
<S> <C>
2.2.1 WVB Options
3.1 Organization
3.3 Approvals and Conflicts
3.4 Additional Payments and Fees
3.5 Capitalization of WVB and WVB Affiliates
3.8 Certain Changes or Events
3.9 Undisclosed Material Liabilities
3.10 Intercompany Balances
3.11 Payments
3.12(a) Leases
3.12(b) Real Property
3.12(d) Liens
3.13 Channels
3.15 Contracts
3.16 Claims and Legal Proceedings
3.18 Labor Matters
3.19 Patents, Trademarks, Etc.
3.20 Customers
3.21 Applicable Laws
</TABLE>
-iv-
<PAGE> 97
EXHIBITS
<TABLE>
<S> <C>
2.1.2 Forms of Certificate of Merger and Articles of Merger
2.1.3 Form of Amendment to Articles of Incorporation of WVB
2.1.4 Form of Amended and Restated Bylaws of WVB
2.4 Value of Channels
5.12 Form of Affiliate Agreement
5.17 Brazilian Certificates
6.5 Form of Shareholders Agreement
6.6 Form of Opinion of WVB Counsel
6.7 Form of Confidentiality, Noncompetition and Proprietary Information Agreement
6.12 Form of WVB Officers' Certificate
6.18 Form of Negative Pledge Agreement
7.6 Form of Nextel and Indimich Officers' Certificate
7.9 Form of Opinion of Nextel Counsel
</TABLE>
-v-
<PAGE> 98
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is made as of October
28, 1996 by and among NEXTEL COMMUNICATIONS, INC., a Delaware corporation
("Nextel"), DIAL CALL INDIMICH, INC., a Delaware corporation and direct wholly
owned subsidiary of Nextel ("Indimich"), and WIRELESS VENTURES OF BRAZIL, INC.,
a Virginia corporation ("WVB").
RECITALS
A. WVB, Nextel and Indimich believe it advisable and in their respective
best interests to effect a merger of WVB and Indimich pursuant to this Agreement
(the "Merger").
B. WVB Controls (as defined below) or has certain interests in certain
Persons (as defined below) that (i) hold trunking licenses issued by the
Federative Republic of Brazil ("Brazil") authorizing the use of the 1,700
Specialized Mobile Radio ("SMR") channels listed on Schedule 3.13 in the
frequency ranges of 851.0125 megahertz ("MHz") to 865.9875 MHz for base to
mobile and 806.0125 MHz to 820.9875 MHz for mobile to base in certain cities in
Brazil (the "Channels") and (ii) own certain assets relating to the SMR business
(the businesses of WVB and of the Persons that WVB Controls or Persons of which
WVB or any WVB Affiliate (as defined below) has an option to acquire Control
(the "WVB Affiliates") being referred to collectively herein as the "Business").
C. Prior to the closing of the Merger, WVB intends to exchange each share
of its outstanding common stock, par value $.01 per share, for 81 shares of
Class A Common Stock, par value $.01 per share, having 90/81 votes per share
(the "Class A Common Stock"), and 19 shares of Class B Common Stock, par value
$.01 per share, having 10/19 vote per share (the "Class B Common Stock";
together with the Class A Common Stock, the "WVB Common Stock").
D. WVB desires and intends to submit to a vote of its shareholders (the
"Founders") a proposal to convert all of the outstanding Class A Common Stock
into Class A common stock, par value $.001 per share, of Nextel (the "Nextel
Common Stock") and to cause the merger of Indimich with and into WVB, and Nextel
desires and intends to cause (i) the merger of Indimich with and into WVB (after
the Merger, the "Surviving Corporation"), on the terms and subject to the
conditions herein set forth, and (ii) the transfer of all of the stock of the
Surviving Corporation held by Nextel to McCaw International, Ltd., an indirect
and wholly owned subsidiary of Nextel.
E. The parties intend that the transactions contemplated hereby qualify as
a tax-free reorganization under Section 368(a) of the Internal Revenue Code of
1986, and the Treasury regulations promulgated thereunder both as amended and in
effect as of the date hereof (the "Code").
F. The Board of Directors of Nextel, Indimich and WVB, and the sole
shareholder of Indimich have approved the Merger and this Agreement.
In consideration of the mutual promises contained herein, the parties
hereto agree as follows:
ARTICLE I
DEFINITIONS
1.1 DEFINED TERMS
As used in this Agreement, the following terms shall have the following
meanings:
"Acquisition Proposal" has the meaning set forth in Section 5.11(a).
"Affiliate" of any Person (the "Subject") means any other Person which,
directly or indirectly, Controls or is Controlled by or is under common
Control with the Subject and, without limiting the generality of the
foregoing, shall in any event include (a) any Person which beneficially
owns or holds 5% or more of
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any class of voting securities of the Subject or 5% or more of the legal or
beneficial interest in the Subject, and (b) any Person of which the Subject
beneficially owns or holds 5% or more of any class of voting securities or
5% or more of the legal or beneficial interest.
"Affiliate Agreement" has the meaning set forth in Section 5.12.
"Agreement" has the meaning set forth in the introductory paragraph.
"AirLink" has the meaning set forth in Section 2.5(b).
"Assets" has the meaning set forth in Section 3.3.
"Brazil" has the meaning set forth in the Recitals.
"Business" has the meaning set forth in the Recitals.
"Certificates" has the meaning set forth in Section 2.2.2(a).
"Channels" has the meaning set forth in the Recitals.
"Class A Common Stock" has the meaning set forth in the Recitals.
"Class B Common Stock" has the meaning set forth in the Recitals.
"Closing" has the meaning set forth in Section 2.3.
"Closing Average" has the meaning set forth in Section 2.2.1(a).
"Closing Balance Sheet" has the meaning set forth in Section 2.5(a).
"Closing Date" has the meaning set forth in Section 2.3. "Code" has the
meaning set forth in the Recitals.
"Confidentiality Agreement" has the meaning set forth in Section 5.8.
"Control" (including, with correlative meanings, the terms "Controlled by"
and "under common Control with"), as used with respect to any Person, means
the possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through
the ownership of voting securities or by contract or otherwise.
"Converted Share" has the meaning set forth in Section 2.2.2(a).
"Corporation" has the meaning set forth in Section 7701(a)(3) of the Code.
"Damages" has the meaning set forth in Section 9.1.
"DGCL" has the meaning set forth in Section 2.1.1(b).
"Effective Time" has the meaning set forth in Section 2.1.2.
"Exchange Act" means the Securities Exchange Act of 1934, as amended from
time to time.
"Financial Statements" has the meaning set forth in Section 3.7.1.
"Founder Representative" has the meaning set forth in Section 2.4.3.
"Founders" has the meaning set forth in the Recitals.
"HSR Act" has the meaning set forth in Section 4.3.
"Indemnifying Founder" means Telcom Ventures, LLC, South Beach Ventures,
Inc., Rajendra Singh, Neera Singh, the Hersh Raj Singh Education Trust and
the Samir Raj Singh Education Trust, and any successor thereto.
"Indemnifying Party" has the meaning set forth in Section 9.3.
"Indemnitee" has the meaning set forth in Section 9.3.
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"Indimich" has the meaning set forth in the introductory paragraph.
"Interim Financial Statements" has the meaning set forth in Section 3.7.2.
"Knowledge of WVB" means, with respect to the existence or absence of a
fact, matter, event or circumstance, the actual knowledge of any director
or officer of WVB, any Founder, or any director or officer of any WVB
Affiliate.
"LCC" has the meaning set forth in Section 2.5(b).
"License" has the meaning set forth in Section 3.4.
"License Issue" has the meaning set forth in Section 2.4.3.
"License Transfer Date" has the meaning set forth in Section 2.4.3(b).
"Lien" means, with respect to any property or asset, any mortgage, lien,
pledge, deed of trust, charge, security interest, encumbrance or other
adverse claim of any kind with respect to such property or asset.
"Master Service Agreement" has the meaning set forth in Section 2.5(b).
"Merger" has the meaning set forth in the Recitals.
"MHz" has the meaning set forth in the Recitals.
"Ministry" has the meaning set forth in Section 5.16(a).
"Ministry Letter" has the meaning set forth in Section 5.16(a).
"Ministry Memorandum" has the meaning set forth in Section 5.16(a).
"Nextel" has the meaning set forth in the introductory paragraph, and shall
include any successor corporations.
"Nextel Common Stock" has the meaning set forth in the Recitals.
"Nextel Representative" has the meaning set forth in Section 2.4.3.
"Nextel Shares" means the shares of Nextel Common Stock to be issued
pursuant to Section 2.2.1.
"Original Letter" has the meaning set forth in Section 5.10.
"PCS" has the meaning set forth in Section 8.1(a).
"Permitted Liens" has the meaning set forth in Section 3.12(d).
"Person" means any individual, partnership, limited liability company,
joint-stock company, firm, corporation, association, unincorporated
organization, joint venture, trust or other entity.
"Personal Property" has the meaning set forth in Section 3.12(a).
"Pro Rata Share" means, with respect to any Indemnifying Founder, the
number of shares of Nextel Common Stock received by such Indemnifying
Founder at the Closing multiplied by the Closing Average.
"Prohibited Transaction" means (i) a transfer by Nextel of the stock of
WVB, or the transfer by WVB of all or a significant part of its assets,
other than a transfer by Nextel of the stock of WVB or a transfer by WVB of
its assets in a transaction that maintains the tax-free status of the
Merger (to the Founders) by reason of Section 368(a)(2)(C) of the Code,
(ii) a transfer by a member of the WVB Group of all or a significant
portion of its assets to an entity other than a corporation (except
transfers of assets in the ordinary course of the transferor's business),
(iii) a transfer by a member of the WVB Group of all or a significant
portion of its assets to a corporation that the transferor does not control
(within the meaning of Section 368(c) of the Code) after the transfer and
(iv) any transaction that terminates the membership of WVB or a WVB
Affiliate in the WVB Group (other than a termination whereby one member of
the WVB Group merges or liquidates into another member of the WVB Group or
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a corporation controlled (within the meaning of Section 368(c) of the Code)
by a member of the WVB Group).
"Proxy Statement/Prospectus" has the meaning set forth in Section 5.10.
"Radio-Tel" has the meaning set forth in Section 5.16(a).
"Regulatory Issue" has the meaning set forth in Section 5.16(a).
"S-4 Registration Statement" has the meaning set forth in Section 5.10.
"Satisfactory Regulatory Comfort" has the meaning set forth in Section
6.18.
"SEC" means the U.S. Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended from time to
time.
"Shareholders Agreement" has the meaning set forth in Section 6.5.
"SMR" has the meaning set forth in the Recitals.
"Superior Proposal" has the meaning set forth in Section 5.11(a).
"Supplemental WVB Proposal" has the meaning set forth in Section 5.16(a).
"Surviving Corporation" has the meaning set forth in the Recitals.
"Tax" and "Taxes" mean any and all net income, gross income, gross
receipts, sales, use, ad valorem, transfer, franchise, profits, license,
withholding, payroll, employment, excise, estimated, stamp, occupation,
premium, property, customs duty and other tax, fee, assessment, or similar
charge of any kind whatsoever, together with interest and penalties,
additions to the tax, and additional amounts imposed in connection with
such tax by any Tax Authority, whether U.S. or foreign.
"Tax Authority" has the meaning set forth in Section 3.11.
"Tax Returns" means all returns (including information returns), reports,
estimates, elections, declarations, statements, forms, requests for
extensions of time, and other documents (including any schedule, exhibit,
or any other attachment to such documents) relating to or required to be
filed with any Tax Authority or any other Person pursuant to any federal,
state or local law, whether U.S. or foreign.
"Telcom" has the meaning set forth in Section 2.2.1(a).
"Telcom Note" means the promissory note dated January 1, 1995 made by WVB
to Telcom.
"Termination Notice Date" has the meaning set forth in Section 2.4.3(b).
"VSCA" has the meaning set forth in Section 2.1.1(a).
"Working Capital Excess" has the meaning set forth in Section 2.5(b).
"WVB" has the meaning set forth in the introductory paragraph.
"WVB Affiliates" has the meaning set forth in the Recitals.
"WVB Common Stock" has the meaning set forth in the Recitals.
"WVB Group" means the "affiliated group" of corporations of which WVB is
the "common parent" corporation (as those terms are used in Section 1504 of
the Code) as determined immediately prior to the Closing Date and without
regard to Section 1504(b)(3) (concerning foreign corporations).
"WVB Optionholders" has the meaning set forth in Section 2.2.1(a).
"WVB Options" has the meaning set forth in Section 2.2.1(a).
"WVA Response" has the meaning set forth in Section 5.16(a).
"WVB Securities" has the meaning set forth in Section 3.5.
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1.2 OTHER DEFINITIONAL MATTERS
(a) The words "this Agreement," "hereby," "herein," "hereof," "hereunder"
and words of similar import refer to this Agreement as a whole and not to any
particular provisions of this Agreement, and the words "Article," "Section,"
"Schedule," "Exhibit" and like references are to this Agreement unless otherwise
specified.
(b) Singular and plural forms, as the case may be, of terms defined herein
have correlative meanings.
(c) Any defined term which relates to a document includes within its
definition any amendments, modifications, renewals, restatements, extensions,
supplements or substitutions which may heretofore have been or which may
hereafter be executed in accordance with the terms thereof and as may be
permitted by this Agreement.
ARTICLE II
THE MERGER
2.1 THE MERGER
2.1.1 THE MERGER OF INDIMICH AND WVB
(a) Upon the terms and subject to the conditions of this Agreement, at the
Effective Time and in accordance with the Delaware General Corporation Law (the
"DGCL") and the Virginia Stock Corporation Act (the "VSCA"), Indimich shall be
merged with and into WVB, and the separate corporate existence of Indimich shall
thereupon cease.
(b) WVB shall be the surviving corporation in the Merger, shall succeed to
all of the assets and liabilities of each of WVB and Indimich, as provided in
the DGCL and the VSCA, and shall continue its existence under the provisions of
the DGCL and the VSCA.
2.1.2 EFFECTIVE TIME OF THE MERGER
On the Closing Date and subject to the terms and conditions hereof, a
certificate of merger and articles of merger complying with the applicable
provisions of the DGCL and the VSCA, respectively, substantially in the form
attached hereto as Exhibit 2.1.2, shall be executed by the parties to the Merger
and filed with the Secretary of State of the State of Delaware and the Virginia
State Corporate Commission, respectively, pursuant to the DGCL and the VSCA,
respectively. The Merger shall become effective at the time and on the date
specified in the articles of merger as so filed, such time being herein called
the "Effective Time."
2.1.3 ARTICLES OF INCORPORATION
The Articles of Incorporation of WVB shall as of the Effective Time be
amended as set forth in Exhibit 2.1.3, and such Articles of Incorporation as so
amended shall be the Articles of Incorporation of the Surviving Corporation
after the Effective Time until duly amended.
2.1.4 BYLAWS
At the Effective Time, the Bylaws of the Surviving Corporation shall be in
the form attached hereto as Exhibit 2.1.4 and shall be the Bylaws of the
Surviving Corporation after the Effective Time until duly amended.
2.1.5 OFFICERS AND DIRECTORS OF SURVIVING CORPORATION
At the Effective Time, the officers and directors of Indimich immediately
prior to the Merger shall become and continue to be the officers and directors
of the Surviving Corporation.
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2.1.6 EFFECTS OF MERGER
The Merger shall have the effects set forth in Section 257 of the DGCL and
Article 12, Section 13.1-721, of the VSCA.
2.2 CONVERSION OF SHARES
2.2.1 EFFECT OF MERGER ON CAPITAL STOCK
(a) At the Effective Time, by virtue of the Merger, and without any action
on the part of any holder of any capital stock of WVB, all issued and
outstanding shares of Class A Common Stock and all vested options to purchase
WVB Common Stock (the "WVB Options") shall be converted in the aggregate into
the right to receive from Indimich that number of shares of Nextel Common Stock
equal to (i) (y) $186,300,000 minus (z) the sum of principal and interest due to
Telcom Ventures, LLC ("Telcom") under the Telcom Note as of the Effective Time,
divided by (ii) the average of the closing prices of the Nextel Common Stock on
the Nasdaq National Market for the 20 trading days following but excluding the
date hereof (the "Closing Average"), to be distributed to the Founders and to
holders of WVB Options (the "WVB Optionholders") on a pro rata basis based on
(a) the number of shares of Class A Common Stock held by each Founder as shown
on Schedule 3.5 and (b) the number and value of the shares of WVB Common Stock
that the WVB Optionholders would be entitled to receive if they had exercised
their options in full in a cashless manner immediately prior to the Closing, in
each case as set forth on Schedule 2.2.1. Upon such conversion, all such shares
of Class A Common Stock shall be canceled and cease to exist, and each holder of
a certificate representing any such shares or options shall cease to have any
rights with respect thereto, except the right to receive from Indimich the
shares of Nextel Common Stock to be issued and cash to be paid in lieu of
fractional shares of Nextel Common Stock in consideration therefor upon the
surrender of such certificate in accordance with Section 2.2.2(b).
(b) Each share of common stock of Indimich issued and outstanding at the
Effective Time shall be cancelled.
(c) At the Effective Time, without any action on the part of the parties
hereto, the Telcom Note shall be exchanged for a number of shares of Nextel
Common Stock having a value equal to (i) the sum of principal and interest due
to Telcom under the Telcom Note as of the Effective Time, divided by (ii) the
Closing Average and rounded to the nearest whole share. Immediately following
the Effective Time, the Telcom Note shall automatically be deemed canceled.
2.2.2 EXCHANGE OF CERTIFICATES
(a) Exchange Procedures. At the Effective Time, Nextel shall issue the
Nextel Shares to Indimich and Indimich shall deliver the Nextel Shares to the
holders of Class A Common Stock and WVB Options pursuant to Section 2.2.1(a) and
to Telcom pursuant to Section 2.2.1(c). Each holder of record of (i) a
certificate or certificates that immediately prior to the Effective Time
represented outstanding shares of Class A Common Stock (the "Certificates") or
(ii) a WVB Option, in each case that were converted (the "Converted Shares")
into the right to receive from Indimich shares of Nextel Common Stock pursuant
to Section 2.2.1, shall surrender at the Effective Time the Certificates, or
original documentation representing the WVB Options, as the case may be, in
exchange for a certificate representing that number of whole shares of Nextel
Common Stock which such holder has the right to receive pursuant to the
provisions of this Section 2.2. If any Certificate shall have been lost, stolen,
mislaid or destroyed, upon receipt of (i) an affidavit of that fact from the
holder claiming such Certificate to be lost, stolen, mislaid or destroyed, (ii)
such bond, security or indemnity as Indimich may reasonably require and (iii)
any other documentation necessary to evidence and effect the bona fide exchange
thereof, Indimich shall cause Nextel to issue to such holder a certificate
representing the number of shares of Nextel Common Stock into which the shares
represented by such lost, stolen, mislaid or destroyed Certificate shall have
been converted. Each WVB Optionholder shall provide to Indimich evidence
satisfactory to Indimich of the full and complete satisfaction of all
obligations of WVB to such WVB Optionholder.
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(b) No Fractional Securities. Notwithstanding any other provision of this
Agreement, Indimich shall not transfer any fractional share of Nextel Common
Stock upon the surrender for exchange of Converted Shares. In lieu of any such
fractional shares, any holder of WVB Common Stock and any WVB Optionholder who
would otherwise have been entitled to a fractional share of Nextel Common Stock
shall be entitled to receive from Indimich a cash payment in lieu of such
fractional share in an amount equal to the product of such fraction multiplied
by the Closing Average, without any interest thereon.
(c) Restrictions on Transfer of WVB Common Stock and WVB Options. From and
after the date hereof, other than as described in Section 3.5, WVB shall issue
no additional shares of capital stock and grant no additional options to
purchase capital stock of WVB, and no transfer of any capital stock of WVB shall
be made except to any donee which agrees to be bound by the terms of this
Agreement.
2.2.3 DISSENTERS' RIGHTS
Each holder of shares of Class A Common Stock shall have the dissenters'
rights set forth in Article 15 of the VSCA.
2.3 CLOSING
The closing of the Merger (the "Closing") shall take place at the offices
of Nextel, 1505 Farm Credit Drive, McLean, Virginia, and the dates of the
Closing shall be within five business days following satisfaction or waiver of
the conditions set forth in Article VII, or at such other place or time as
Nextel and WVB may agree (the "Closing Date").
2.4 UNAVAILABLE CHANNELS
2.4.1 OPTIONS TO PURCHASE EQUITY INTERESTS IN LICENSEES
(a) WVB shall (and, so long as the Founders shall Control WVB, the Founders
shall cause each of the WVB Affiliates to) use its commercially reasonable best
efforts to cause, to the extent permitted by applicable laws and without the
incurrence of any material cost to WVB or the Founders, the restructuring of any
agreement between any WVB Affiliate and any third party which jointly owns
equity interests in another WVB Affiliate to (i) increase WVB's direct and
indirect equity ownership of the WVB Affiliates, (ii) cause the transfer of any
equity interests in a WVB Affiliate held by a third party which is a natural
person to a legal entity Controlled by such natural person, and (iii) cause the
transfer to a WVB Affiliate or a designee of a WVB Affiliate of any equity
interests in another WVB Affiliate held by a third party. Nextel and its
Affiliates shall, and following the Closing Date Nextel shall cause the
Surviving Corporation and the WVB Affiliates to, use their commercially
reasonable best efforts to assist in achieving the objectives set forth in the
preceding sentence, including without limitation after the Closing Date paying
the remaining portion of the purchase price, if any, payable under any such
agreement, to the extent such portion is reflected in the Closing Balance Sheet,
and the costs, if any, incurred in effecting such restructuring or transfer. To
the extent the remaining portion of the purchase price, if any, payable under
any such agreement is not reflected in the Closing Balance Sheet, the
Indemnifying Founders shall pay such portion, if required, whether or not
disclosed in the Schedules hereto.
(b) If, on the second anniversary of the Closing Date, the Surviving
Corporation shall not have acquired, directly or indirectly, at least 99% of the
equity interests in any Person owning the License with respect to any Channel
(despite the commercially reasonable best efforts of the Surviving Corporation
and the WVB Affiliates to acquire such interests), unless the Surviving
Corporation shall have received assurances reasonably satisfactory to the
Surviving Corporation that such percentage ownership will be approved by the
relevant Brazilian authorities within the next succeeding six months, the
Surviving Corporation may provide notice to Telcom within 20 days of such second
anniversary demanding payment in accordance with this Section 2.4.1(b). Within
10 days after such notice, (i) the Indemnifying Founders shall pay to the
Surviving Corporation in cash the value of such Channel, as set forth in Exhibit
2.4, or transfer to the Surviving Corporation shares of Nextel Common Stock
having the same value, rounded to the nearest whole share, based on the average
of the closing prices of the Nextel Common Stock on the principal trading market
on
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which such shares are traded for the 20 trading days prior to the date of
transfer of such stock to Nextel, and (ii) on the date of payment, the Surviving
Corporation shall cause the transfer of the Surviving Corporation's direct or
indirect interests in the Person that owns the License with respect to such
Channel to Telcom or any Person designated by Telcom, subject to applicable
regulatory approval, if any. The Founders' aggregate liabilities under this
Section 2.4.1 shall not exceed $25,000,000.
2.4.2 FREQUENCY INTERFERENCE
(a) If, on the Closing Date, any Channel is subject to actual frequency
interference that materially prejudices such Channel's use for its intended
purpose permitted under the applicable License, other than interference that is
required by applicable law or regulation to be abated within six months after
the Closing Date (so long as the application of such law or regulation shall not
have been enjoined or held invalid by a court of competent jurisdiction), the
Surviving Corporation may provide notice to Telcom within 60 days of the Closing
Date demanding payment in accordance with this Section 2.4.2(a). Within 10 days
after such notice, (i) the Indemnifying Founders shall pay to the Surviving
Corporation in cash the value of such Channel, as set forth on Exhibit 2.4, or
transfer to the Surviving Corporation shares of Nextel Common Stock having the
same value, based on the average of the closing prices of the Nextel Common
Stock on the principal trading market on which such shares are traded for the 20
trading days prior to the date of transfer of such stock to Nextel, and (ii) on
the date of such payment, the Surviving Corporation shall cause the relevant WVB
Affiliate to transfer all of its rights with respect to such Channel to Telcom
or any Person designated by Telcom, subject to applicable regulatory approval,
if any.
(b) Notwithstanding the foregoing, if such interference exists as of the
Closing Date, but is required by applicable law or regulation to be abated more
than six months following the Closing Date, the Surviving Corporation and the
Founders shall use commercially reasonable best efforts to cause the abatement
of such interference. If such interference shall not have been abated as of the
18-month anniversary of the Closing Date, the parties shall take the actions
described in Sections 2.4.2(a)(i) and (ii) above within 10 days after written
notice given by the Surviving Corporation within 10 days following such 18-month
anniversary.
2.4.3 REVOCATION OF LICENSES
(a) If, as of the 15-month anniversary of the Closing Date, WVB or any WVB
Affiliate shall have received notification from the Brazilian government of
termination of the License with respect to any Channel because any action had
not been taken or was not being taken, or because the WVB Affiliate was not in
full compliance with all requirements of any law or regulation relating to such
License, in each case on or prior to the Closing Date, the Indemnifying Founders
shall upon notice given by the Surviving Corporation within 20 days following
such 15-month anniversary (or, subject to Section 2.4.3(b), following the
conclusion of any unsuccessful contest contemplated by Section 2.4.3(b)) within
10 days of such notice pay to the Surviving Corporation in cash the value of
such Channel, as set forth on Exhibit 2.4, or transfer to the Surviving
Corporation shares of Nextel Common Stock having the same value, based on the
average of the closing prices of the Nextel Common Stock on the principal
trading market on which such shares are traded for the 20 trading days prior to
the date of transfer of such stock to Nextel.
(b) Between the date hereof and the 15-month anniversary of the Closing
Date, WVB shall provide to Nextel and the Indemnifying Founders copies of any
correspondence with the Brazilian government relating to any claimed or possible
violation of any law or regulation relating to telecommunications in Brazil (a
"License Issue") and shall further provide all other material information from
any party relating to any such License Issue. Immediately following the receipt
of any information indicating that a License Issue exists, the Surviving
Corporation shall form a two-person team to respond to such termination (the
"Team") composed of a designee of Nextel (the "Nextel Representative") and a
designee of Telcom (the "Founder Representative"); provided, however, that
neither the Founder Representative nor the Nextel Representative nor any other
Person acting on the behalf of either Nextel or Telcom or any of their
Affiliates shall contact, directly or indirectly, any Brazilian official or
governmental entity regarding such termination or any issue related to such
termination without the written consent of the Representative of the other side,
which consent shall not be unreasonably withheld. All reasonable expenses of the
Team shall be borne equally except if the Indemnifying
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Founders are ultimately obligated to make a payment to WVB in respect of such
License revocation, in which case the Indemnifying Founders shall bear the
reasonable expenses of the Team. The Team shall be responsible for all material
actions to be taken with respect to such possible or actual termination. If the
Team is unable to agree on how best to respond to any License Issue, either
member of the Team shall have the right to petition the President of each of
Nextel and Telcom to resolve such disagreement. If any such disagreement is not
resolved within 10 days of such a petition, then Nextel must decide either to
(a) assume control of the response with respect to such License Issue, in which
case the Indemnifying Founders shall have no obligations to WVB with respect to
the relevant Channels pursuant to this Section 2.4.3 or (b) permit Telcom to
control the handling of the License Issue. If any License is terminated by the
Brazilian government on or prior to the 15-month anniversary of the Closing Date
for the reasons set forth in Section 2.4.3(a) (the date which notice of such
termination is received by the Surviving Corporation being referred to as the
"Termination Notice Date"), the Surviving Corporation will give written notice
thereof promptly (and in no event later than 20 days following the 15-month
anniversary of the Closing Date) to the Indemnifying Founders. Upon the later of
the one-year anniversary of the Termination Notice Date and the 15-month
anniversary of the Closing Date, if the termination of such License shall not
have been rescinded, the Indemnifying Founders shall make the payment to the
Surviving Corporation in the amount and in the form required by Section
2.4.3(a), and at the request of Telcom, the Surviving Corporation shall, subject
to applicable law and regulation, transfer all rights to such License, including
the right to contest the termination of such License, to the Indemnifying
Founders or their designees (such date of transfer being referred to as the
"License Transfer Date"). If the Indemnifying Founders shall recover full use of
such License prior to the 12-month anniversary of the License Transfer Date,
then the Indemnifying Founders shall have the right to require the Surviving
Corporation to repurchase such License in cash in exchange for the value of the
relevant Channels as set forth on Exhibit 2.4.
2.4.4 LIABILITY
Each of the Indemnifying Founders, by his, her or its approval of this
Agreement, agrees to be bound by the terms of this Section 2.4. The Indemnifying
Founders' liabilities under this Section 2.4 shall be joint and several;
provided, however, that each Indemnifying Founder's liability under this Section
2.4 shall be limited to such Indemnifying Founder's Pro Rata Share.
2.5 CLOSING BALANCE SHEET
(a) As promptly as practicable, but no later than 30 days after the Closing
Date, Telcom, on behalf of the Founders, shall cause to be delivered to Nextel a
consolidated balance sheet of WVB and the WVB Affiliates as of the Closing Date
(the "Closing Balance Sheet"), which shall have been reviewed by KPMG Peat
Marwick LLP. The Closing Balance Sheet shall (i) fairly present the consolidated
financial position of WVB and the WVB Affiliates as at the close of business on
the Closing Date in accordance with U.S. generally accepted accounting
principles applied on a basis consistent with the Financial Statements, (ii)
include line items substantially consistent with those in the Financial
Statements, and (iii) be prepared in accordance with accounting policies and
practices consistent with those used in the preparation of the Financial
Statements.
(b) To the extent that the Closing Balance Sheet indicates that the
consolidated current liabilities of WVB and the WVB Affiliates exceed the
consolidated current assets of WVB and the WVB Affiliates immediately following
the Effective Time by more than US$6,000,000 (any such excess being referred to
herein as the "Working Capital Excess"), by their approval of this Agreement,
the Indemnifying Founders agree to pay Nextel the Working Capital Excess in cash
or, at the option of Telcom, in Nextel Common Stock (valued at the average of
the closing prices of the Nextel Common Stock on the Nasdaq National Market for
the 20 trading days prior to the date of transfer of such shares) within 15 days
of Telcom's delivery of the Closing Balance Sheet, subject to Section 2.5(c).
The amount payable to LCC, L.C.C. ("LCC") under the Master Service Agreement
between LCC and AirLink Servicos e Comercio, Ltda. ("AirLink") dated as of
September 5, 1996 (the "Master Service Agreement"), as reflected on the Closing
Balance Sheet, shall not exceed $275,000, and the amount payable to LCC under
the ANET Agreement between LCC and AirLink
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dated as of October 21, 1994, as amended March 28, 1996, as reflected on the
Closing Balance Sheet, shall not exceed $200,000.
(c) If Nextel disagrees with Telcom's calculation of the Working Capital
Excess, Nextel may, within 15 days of Telcom's delivery of the Closing Balance
Sheet, deliver a notice to Telcom disagreeing with such calculation and setting
forth Nextel's calculation. Any such notice of disagreement shall specify those
items or amounts as to which Nextel disagrees, and Nextel shall be deemed to
have agreed with all other items and amounts contained in the Closing Balance
Sheet and the calculation of the Working Capital Excess delivered pursuant to
Section 2.5(a).
(d) If a notice of disagreement shall be delivered pursuant to Section
2.5(c), Nextel and Telcom shall, during the 15 days following such delivery, use
their best efforts to reach agreement on the disputed items or amounts in order
to determine, as may be required, the amount of the Working Capital Excess,
which amount shall not be less than the amount thereof shown in Telcom's
calculations delivered pursuant to Section 2.5(b) nor more than the amount
thereof shown in Nextel's calculation delivered pursuant to Section 2.5(c). If,
during such period, Nextel and Telcom are unable to reach such agreement, they
shall promptly thereafter cause an independent accounting firm of nationally
recognized standing reasonably satisfactory to Nextel and Telcom (which shall
not have any material relationship with Nextel or Telcom or any of their
Affiliates), promptly to review this Agreement and the disputed items or amounts
for the purpose of calculating the Working Capital Excess. WVB and Telcom shall
provide all detailed documentation necessary to support the computation
underlying Telcom's calculation of the Working Capital Excess. In making such
calculation, such independent accountants shall consider only those items or
amounts in the Closing Balance Sheet or Telcom's calculation of the Working
Capital Excess as to which Nextel has disagreed. Such independent accountants
shall deliver to Nextel and Telcom, as promptly as practicable, a report setting
forth such calculation. Such report shall be final and binding upon Nextel and
Telcom. The cost of such review and report shall be borne (i) by Nextel if the
difference between the Working Capital Excess and Nextel's calculation of the
Working Capital Excess delivered pursuant to Section 2.5(b) is greater than the
difference between the Working Capital Excess and Telcom's calculation of the
Working Capital Excess delivered pursuant to Section 2.5(c), (ii) by Telcom if
the first such difference is less than the second such difference, and (iii)
otherwise equally by Nextel and Telcom.
(e) Nextel and WVB agree that they will, and agree to cause their
respective independent accountants and each WVB Affiliate to, cooperate and
assist in the preparation of the Closing Balance Sheet and the calculation of
the Working Capital Excess and in the conduct of the audits and reviews referred
to in this Section 2.5, including, without limitation, the making available to
the extent necessary of books, records, work papers and personnel.
2.6 SERVICE OF PROCESS
WVB, as the surviving corporation in the Merger, hereby agrees that it may
be served with process in Delaware in any proceeding referred to in Section
252(d) of the DGCL, and hereby irrevocably appoints the Secretary of State of
Delaware as its agent to accept service of process in any suit or other
proceeding for such purposes; a copy of such process shall be mailed to WVB by
the Secretary of State to the address provided for WVB in Section 11.8.
2.7 TAX TREATMENT OF ADJUSTMENTS
Any payment made pursuant to Section 2.4, Section 2.5 or Article IX shall
be treated by the parties for federal income tax purposes as an adjustment to
the purchase price, unless otherwise required by law.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF WVB
To induce Nextel and Indimich to enter into and perform this Agreement, WVB
represents and warrants to Nextel and Indimich (which representations and
warranties shall survive the Closing as provided in
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Section 9.4) all as follows in this Article III. The contents of any particular
Schedule to this Article III shall not be deemed included in any other Schedule
unless specifically cross-referenced to such Schedule.
3.1 ORGANIZATION, GOOD STANDING, ETC.
WVB is a corporation duly organized, validly existing and in good standing
under the laws of Virginia, and each WVB Affiliate is duly organized, validly
existing and in good standing under the laws of its respective jurisdiction of
organization. Each of WVB and the WVB Affiliates has all corporate power and
authority required to own, operate and lease its properties and assets and to
carry on its business (including the SMR business, when applicable) as now
conducted, except where such failure to have corporate power and authority would
not have a material adverse effect on WVB and the WVB Affiliates, taken as a
whole. Except as listed on Schedule 3.1, neither WVB nor any WVB Affiliate is
required to be qualified to do business as a foreign corporation in any state or
country. Except as listed on Schedule 3.5, WVB does not have any subsidiaries or
any direct or indirect investments in any other Person.
3.2 AUTHORIZATION, DUE EXECUTION AND BINDING EFFECT
Other than the vote of the Founders, all corporate action, including, but
not limited to, the approval of the board of directors of WVB and, if required,
the approval of the boards of directors, shareholders or quotaholders of the WVB
Affiliates, to authorize and perform this Agreement and the transactions
contemplated hereby has been taken. This Agreement has been duly executed and
delivered by WVB and is a legal, valid and binding obligation of WVB enforceable
in accordance with its terms, subject to the approval of the Founders.
3.3 NO APPROVALS OR NOTICES REQUIRED; NO CONFLICTS WITH INSTRUMENTS
Except as listed on Schedule 3.3 and except where a violation would not
have a material adverse effect on WVB and the WVB Affiliates, taken as a whole,
the execution, delivery and performance of this Agreement by WVB and the
consummation of the transactions contemplated hereby, including, but not limited
to, the transfer of control of the Persons holding all SMR rights (which include
but are not limited to telephony and interconnect rights as of the date hereof
and as of the Closing Date) in Brazil of WVB and the WVB Affiliates, do not and
will not (a) violate the corporate charter or other organizational documents of
the Founders, WVB or the WVB Affiliates, (b) constitute a violation (with or
without the giving of notice or lapse of time, or both) of any law, rule,
regulation, judgment, injunction, order or decree applicable to the Founders,
WVB or the WVB Affiliates, (c) require any consent, approval or authorization of
any Person, governmental authority or other organization or entity, (d) result
in a default under, an acceleration or termination of, or the creation in any
party of the right to accelerate, terminate, modify or cancel, or in any other
way materially affect the rights of WVB under, any material agreement, lease,
note or other restriction, encumbrance, obligation or liability to which any of
the Founders, WVB or the WVB Affiliates are a party or by which the Founders,
WVB or the WVB Affiliates are bound or to which the assets (whether real or
personal, tangible or intangible) of WVB and the WVB Affiliates (the "Assets")
are subject, or (e) result in the creation or imposition of any Lien on any of
the Assets. WVB has provided to Nextel true and complete copies of all corporate
and organizational documents of WVB and the WVB Affiliates, and there has been
no change to any such documents since the date of such certification except as
described on Schedule 3.3. WVB has provided to Nextel copies of the minute books
and other customary corporate documents of WVB and the WVB Affiliates, and such
minute books and other customary corporate documents are true, complete and
correct.
3.4 LICENSES, PERMISSIONS, PERMITS, AUTHORIZATIONS, ETC.
WVB and the WVB Affiliates have received all currently required
governmental approvals, authorizations, consents, licenses, orders, permissions,
registrations and permits of all agencies, whether local or national, including,
but not limited to, municipal and national licenses to engage in the business of
trunking throughout Brazil and authorizations to use the Channels (collectively,
the "Licenses"), and all such Licenses are valid and in force, except where the
failure to have any such valid License in force would not, individually
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or in the aggregate, have a material adverse effect on WVB and the WVB
Affiliates, taken as a whole. Except as listed on Schedule 3.4 and except for
"Fistel" payments and other tax obligations generally applicable to SMR Licenses
in Brazil, no additional payments or fees of any kind are required to be paid to
governmental authorities to conduct the Business. Except as listed on Schedule
3.4, all Fistel payments, other tax obligations generally applicable to SMR
Licenses in Brazil and other payments or fees required to be paid to
governmental authorities to conduct the Business have been paid.
3.5 CAPITALIZATION OF WVB AND WVB AFFILIATES
As of the date hereof, there are 1,000,000 authorized shares of WVB Common
Stock and 90,341 shares of WVB Common Stock issued and outstanding. Immediately
prior to the Closing, there shall be 7,317,621 shares of Class A Common Stock
and 1,716,479 shares of Class B Common Stock issued and outstanding. All
outstanding shares of capital stock of WVB and the WVB Affiliates have been duly
authorized and validly issued and are fully paid and non-assessable. Except as
described in this Section 3.5 and on Schedule 3.5, there are no outstanding (a)
shares of capital stock or voting securities of WVB or any WVB Affiliate, (b)
securities of WVB or any WVB Affiliate convertible into or exchangeable for
shares of capital stock or voting securities of WVB or any WVB Affiliate, or (c)
options or other rights to acquire from WVB or any WVB Affiliate, or other
obligation of WVB or any WVB Affiliate to issue, any capital stock, voting
securities or securities convertible into or exchangeable for capital stock or
voting securities of WVB or any WVB Affiliate (the items in clauses (a), (b) and
(c) being referred to collectively as the "WVB Securities"). There are no
outstanding obligations of WVB, any WVB Affiliate or any Affiliate of WVB to
acquire any WVB Securities. Schedule 3.5 is a true and complete list of the
jurisdiction of organization, type of entity, attorney-in-fact (if any),
delegate manager (if any), capitalization and voting rights of WVB and each WVB
Affiliate. All capital invested by WVB and Telcom in the WVB Affiliates in
Brazil has been duly registered with the Central Bank of Brazil as evidenced by
Certificates of Foreign Investment issued by the Central Bank of Brazil, except
as listed on Schedule 3.5.
3.6 OWNERSHIP OF WVB COMMON STOCK AND CAPITAL STOCK OF WVB AFFILIATES
The Founders are the record and legal owners of the shares of WVB Common
Stock listed as owned by them on Schedule 3.5, free and clear of any Lien and
any other limitation or restriction (including any restriction on the right to
vote, sell or otherwise dispose of the WVB Common Stock). WVB and the WVB
Affiliates are the record and legal owners of the capital stock of the WVB
Affiliates owned by them, as disclosed on Schedule 3.5, free and clear of any
Lien and any other limitation or restriction (including any restriction on the
right to vote, sell or otherwise dispose of any such capital stock). All
individuals who own quotas in the WVB Affiliates that are majority-owned by WVB
are nominees who have no rights to transfer or prevent the transfer of such
quotas other than as instructed by WVB or its Affiliates.
3.7 FINANCIAL STATEMENTS
3.7.1 GENERAL
WVB has previously delivered to Nextel consolidated financial statements of
WVB and the WVB Affiliates as of and for the year ended December 31, 1995 and as
of and for the seven months ended July 31, 1996 (the "Financial Statements").
The Financial Statements present fairly the consolidated financial position and
results of operations of WVB and the WVB Affiliates as of the dates and for the
periods indicated therein in accordance with U.S. generally accepted accounting
principles consistently applied; provided, however, that the Financial
Statements for the seven months ended July 31, 1996 may be subject to normal
year-end adjustments of a type consistent with prior years and without
footnotes.
3.7.2 INTERIM FINANCIAL STATEMENTS
WVB has furnished or will furnish to Nextel prior to the Closing monthly
consolidated financial statements of WVB and the WVB Affiliates for periods
subsequent to July 31, 1996 (the "Interim Financial Statements"). Any such
Interim Financial Statements shall be delivered to Nextel within 30 days of the
last
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day of the relevant month. The Interim Financial Statements will have been
prepared and present fairly the consolidated financial condition of WVB and the
WVB Affiliates as of the dates and for the periods indicated thereon in
accordance with U.S. generally accepted accounting principles consistently
applied, subject to normal year-end adjustments of a type consistent with prior
years and without footnotes.
3.8 ABSENCE OF CERTAIN CHANGES
Since July 31, 1996, except as contemplated by this Agreement, and except
as listed on Schedule 3.8, the Business has been conducted in the ordinary
course consistent with past practices and there has not been
(a) to the knowledge of WVB, any event, occurrence, development or state of
circumstances or facts relating to WVB, Telcom or any WVB Affiliate that has had
or could reasonably be expected to have a material adverse effect on the
Business (other than laws or regulations adopted or published for comment,
public court challenges to existing laws or regulations or changes in the
Brazilian economy generally);
(b) any declaration, setting aside or payment of any dividend or other
distribution, whether in cash or securities, with respect to any shares of
capital stock of WVB or any WVB Affiliate, or any repurchase, redemption or
other acquisition by WVB or any WVB Affiliate of any outstanding shares of
capital stock or other securities of, or other ownership interests in, WVB or
any WVB Affiliate;
(c) any amendment of any material term of any outstanding security of WVB
or any WVB Affiliate;
(d) any incurrence, assumption or guarantee by WVB or any WVB Affiliate of
any indebtedness for borrowed money;
(e) any creation or assumption by WVB or any WVB Affiliate of any Lien on
any material asset other than in the ordinary course of business consistent with
past practices;
(f) any making of any loan, advance or capital contributions to or
investment in any Person by WVB or any WVB Affiliate;
(g) any damage, destruction or other casualty loss (whether or not covered
by insurance) affecting the Business or the assets of WVB or any WVB Affiliate
that, individually or in the aggregate, has had or would reasonably be expected
to have a material adverse effect on the Business;
(h) any transaction or commitment made, or any contract or agreement
entered into, by WVB or any WVB Affiliate relating to its assets or the Business
(including the acquisition or disposition of any assets) or any relinquishment
by WVB or any WVB Affiliate of any contract or other right, in either case,
material to WVB or any WVB Affiliate, other than transactions and commitments in
the ordinary course of business consistent with past practices or contemplated
by this Agreement;
(i) any change in any method of accounting or accounting practice by WVB or
any WVB Affiliate;
(j) any (i) employment, deferred compensation, severance, retirement or
other similar agreement entered into by WVB or any WVB Affiliate with any
director, officer or employee thereof or consultant thereto (or any amendment to
any such existing agreement), (ii) grant of any severance or termination pay to
any director, officer or employee of or consultant to WVB or any WVB Affiliate,
or (iii) change in compensation or other benefits payable to any director,
officer or employee of or consultant to WVB or any WVB Affiliate pursuant to any
severance or retirement plans or policies thereof; or
(k) any labor dispute, other than routine individual grievances, or any
activity or proceeding by a labor union or representative thereof to organize
any employees of WVB or any WVB Affiliate, which employees were not subject to a
collective bargaining agreement as of the date of the most recent Interim
Financial Statements, or any lockouts, strikes, slowdowns, work stoppages or
threats thereof by or with respect to any employees of WVB or any WVB Affiliate.
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3.9 LIABILITIES
There are no long-term liabilities of WVB or any WVB Affiliate of any kind
whatsoever, whether accrued, contingent, absolute, determined, determinable or
otherwise, that are required by generally accepted accounting principles to be
reflected in a balance sheet or in the notes thereto, and there is no existing
condition, situation or set of circumstances that is reasonably likely to result
in such a liability, other than liabilities provided for in the Financial
Statements or disclosed on Schedule 3.9. Except as disclosed on Schedule 3.9,
none of the liabilities of WVB or the WVB Affiliates are past due, and all such
liabilities were incurred in the ordinary course of business on terms consistent
with past practices.
3.10 INTERCOMPANY TRANSACTIONS
Except as disclosed on Schedule 3.10, there are no intercompany balances,
and there are no and have not been any intercompany transactions, between WVB or
the WVB Affiliates, on the one hand, and the Founders, on the other hand.
3.11 TAXES
WVB and the WVB Affiliates have accurately prepared in all material
respects and duly filed with the appropriate federal, state, local and foreign
taxing authorities (the "Tax Authorities") all tax returns, information returns
and reports that are, individually and in the aggregate, material and are
required to be filed on or before the date hereof with respect to WVB and the
WVB Affiliates, and, except as disclosed on Schedule 3.11, have paid in full or
made adequate provision for the payment of all material Taxes. Except as
disclosed on Schedule 3.11, neither WVB nor any WVB Affiliate is delinquent in
the payment of any material Taxes, and no deficiencies have been assessed or
threatened with respect to any Taxes. Neither WVB nor any WVB Affiliate has
requested or received from any Tax Authorities any extensions or tolling
arrangements with respect to any Taxes or is subject to any open or threatened
audits by any Tax Authorities.
3.12 ASSETS
(a) WVB has delivered to Nextel true and complete copies of all material
leases, subleases, rental agreements, contracts of sale or licenses of any
portion of the personal property (the "Personal Property") owned, leased or
rented by WVB and the WVB Affiliates as of the date hereof. WVB or the WVB
Affiliates have legal ownership of or other legal rights to use all property
used in the conduct of the Business as presently conducted. Schedule 3.12(a)
lists all leased Personal Property with a monthly lease payment (or annual lease
payment pro-rated on a monthly basis) in excess of 1,000 Brazilian Reals.
(b) Except as listed on Schedule 3.12(b), WVB and the WVB Affiliates do not
own, lease or use any material real property.
(c) Each material lease, license, rental agreement, contract of sale or
other agreement to which any Assets are subject is valid and in good standing;
each of WVB and the WVB Affiliates have performed all material obligations
imposed upon it thereunder, and none of WVB, the WVB Affiliates or, to the
knowledge of WVB, any other party thereto is in material default thereunder in
any material respect, nor is there any event that with or without the giving of
notice or lapse of time, or both, would constitute a material default thereunder
by WVB or the WVB Affiliates or, to the knowledge of WVB, any other party
thereto. Neither WVB nor the WVB Affiliates have received notice, and none of
the Founders is otherwise aware, that any party to any such lease, license,
rental agreement, contract of sale or other agreement intends to cancel,
terminate or refuse to renew the same or to exercise or decline to exercise any
option or other right thereunder. No Assets are subject to any lease, license,
contract of sale or other agreement that is reasonably likely to have a material
adverse effect upon the business, properties or financial condition of WVB or
any WVB Affiliates.
(d) Except as listed on Schedule 3.12(d), the Assets are free and clear of
all Liens other than landlord's Liens, Liens for taxes not yet due or for
overdue taxes disclosed on Schedule 3.9, workmen's Liens, vendor's Liens or
other immaterial Liens arising in the ordinary course of business (collectively,
"Permitted Liens")
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and, other than leased Assets, each of WVB and the WVB Affiliates have good and
marketable title thereto. WVB and the WVB Affiliates have valid leasehold
interests in all leased Assets.
(e) No Person has any right of first refusal or option to acquire any
interest in the Assets or any part thereof, and neither WVB nor the WVB
Affiliates have sold or contracted to sell the Assets or any part thereof or
interest therein other than as set forth herein.
3.13 CHANNELS
WVB directly or indirectly holds licenses for, or has enforceable rights to
acquire Persons that hold licenses for, the Channels, as listed on Schedule
3.13. Schedule 3.13 sets forth the location of each Channel, the number of such
Channel, the WVB Affiliate having rights to such Channel, the dates of grant and
expiration of the License with respect to such Channel, any extension or renewal
periods or requests therefor, and the status thereof with respect to such
License, any required loading dates, and the status thereof, with respect to
such Channel, the number of subscribers using Channels in such location as of
September 30, 1996 and the nature of any frequency interference with the use of
such Channel. Except as listed on Schedule 3.13, the Founders, WVB and the WVB
Affiliates have no other interests, direct or indirect, contingent or pending,
in frequencies capable of being used for SMR service in Brazil. To the knowledge
of WVB, any commercially reasonable action that is necessary to preserve the
rights to any Licenses or Channels has been taken or is being taken, subject to
the policies described on Schedule 3.21. The WVB Affiliates have followed the
policies described on Schedule 3.21, which policies WVB reasonably believes
comply with the requirements of applicable law and regulations.
3.14 COMPLIANCE WITH ENVIRONMENTAL LAWS
None of the Founders, WVB, the WVB Affiliates or any other Person
(including, without limitation, any previous owner, lessee, sublessor or
sublessee) has generated, handled, used, manufactured, processed, distributed in
commerce, transported, treated, stored, disposed of, or released (or arranged
for the transportation, treatment, storage, disposal or release of) petroleum,
petroleum products, hazardous waste, hazardous chemicals or substances, toxic
chemicals, chemical substances or mixtures, pollutants or contaminants on, at or
from any assets or properties owned, leased, subleased or used by WVB or the WVB
Affiliates in the operation of the Business or on, at or from any real property
to which any of the above-listed substances from the above-listed assets or
properties were transported, or at or on which they were treated or disposed, in
a manner that could subject WVB, the WVB Affiliates or Nextel or its Affiliates
to any material liability under any provision of law in existence on or prior to
the Closing Date.
3.15 CONTRACTS
WVB has given to Nextel a copy of, and made available for review by Nextel
originals of, all material contracts, oral or written, to which WVB, Telcom (to
the extent such contract relates to the Business) and the WVB Affiliates are a
party, including, without limitation, security agreements, conditional sale
agreements and instruments relating to the borrowing of money. Schedule 3.15
lists all such contracts. All such contracts are valid and in full force and
effect, WVB or the WVB Affiliates, as the case may be, have performed all
material obligations imposed upon it or them thereunder, and there are not,
under any of such contracts, any defaults or events of default on the part of
WVB or the WVB Affiliates, as the case may be, or, to the knowledge of WVB, any
other party thereto, that would materially adversely affect the business, assets
or financial condition of WVB or such WVB Affiliate or which could reasonably be
expected to materially adversely affect the business prospects of WVB or such
WVB Affiliate. Neither WVB nor any WVB Affiliate has received notice, nor is WVB
otherwise aware, that any party to any such contract intends to cancel,
terminate or refuse to renew such contract or to exercise or decline to exercise
any option or right thereunder.
3.16 CLAIMS AND LEGAL PROCEEDINGS
Except as described on Schedule 3.16, there are no claims, actions, suits,
arbitrations, proceedings or investigations pending or, to the knowledge of WVB,
threatened against any of the Founders, WVB or any
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WVB Affiliate with respect to the Business, before or by any governmental or
nongovernmental department, commission, board, bureau, agency, instrumentality
or any other Person. Except as described on Schedule 3.16, to the knowledge of
WVB, there is no existing or pending legislative or regulatory or existing,
pending or threatened judicial action by any federal, state or local entity in
Brazil that could reasonably be construed or expected to deny or materially
hinder the right of WVB or any WVB Affiliate to use the Channels for their
intended purpose under the applicable License or the ability of WVB or any WVB
Affiliate to interconnect to the public telephone network, to reuse the same
frequency in each License's geographic area, to employ the integrated digital
enhanced network technology in the Channels or to operate all the Channels
together in the manner that they are currently operated. There are no
outstanding or unsatisfied judgments, orders, decrees or stipulations to which
any of the Founders, WVB or any WVB Affiliate is a party that involve the
transactions contemplated hereby or that could individually or in the aggregate
have a material adverse effect upon the business, assets, or financial condition
or business prospects of WVB or any WVB Affiliate.
3.17 INTERCONNECT RIGHTS
To the knowledge of WVB, the WVB Affiliates have the legal right to
interconnect their Channels to the public telephone network in Brazil.
3.18 LABOR MATTERS
There are no material disputes, employee grievances, disciplinary actions
or legal actions pending or threatened between WVB or any WVB Affiliate and any
of their respective employees or independent contractors and no claims under
U.S. or Brazilian law. Each of WVB and the WVB Affiliates have complied in all
material respects with all provisions of all laws in the United States and
Brazil relating to the employment of labor and have no liability for any arrears
of wages, social security payments or taxes or penalties for failure to comply
with any such laws, including but not limited to in connection with work
performed by independent contractors. To the knowledge of WVB, there are no
organizational efforts presently being made or threatened by or on behalf of any
labor union with respect to any of the employees of WVB or the WVB Affiliates.
Except as specifically set forth on Schedule 3.18, neither WVB nor any WVB
Affiliate is a party to any:
(a) management, employment or other contract providing for the employment
or rendition of executive services;
(b) employment contract that is not terminable without penalty by WVB or
any WVB Affiliate on 30 days' notice;
(c) bonus, incentive, deferred compensation, severance pay, pension,
profit-sharing, retirement, stock purchase, stock option, employee benefit or
similar plan, agreement or arrangement;
(d) collective bargaining agreement or other agreement with any labor union
or other employee organization (and no such agreement is currently being
requested by, or is under discussion by management with, any group of employees
or others); or
(e) other employment contract or other compensation agreement or
arrangement, oral or written, affecting or relating to current or former
employees of WVB or any WVB Affiliate.
All such contracts and other agreements and arrangements set forth on
Schedule 3.18 are valid and in full force and effect; each of WVB, Telcom and
each WVB Affiliate has performed all material obligations imposed upon it
thereunder, and there are, under any of such contracts, agreements or
arrangements, no defaults or events of default by WVB or any WVB Affiliate or,
to the knowledge of WVB, any other party thereto that would materially adversely
affect the business, assets or financial condition of WVB or any WVB Affiliate,
that would materially adversely affect the relationship of WVB, any WVB
Affiliate or Nextel or its Affiliates with any employee of WVB or any WVB
Affiliate or that could reasonably be expected to materially adversely affect
the business prospects of WVB. Each employee of WVB and the WVB Affiliates has
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a contract in the form of the standard form contract referred to on Schedule
3.18, and no compensation of any kind is due to any such employee other than as
set forth in such contracts.
From July 31, 1996 to and including the Closing Date, neither WVB nor any
WVB Affiliate has made any loans to any of its officers or employees or any of
the officers or employees of Telcom or its Affiliates.
3.19 PATENTS, TRADEMARKS, ETC.
Except as set forth on Schedule 3.19, each of WVB and each WVB Affiliate
owns, or has full and unrestricted rights within Brazil (to the extent available
under Brazilian law) to:
(a) all material trademarks, trade names and copyrights, including, but not
limited to, "AirLink," now used by WVB or the WVB Affiliates, as the case may
be; and
(b) all material formulae, franchises, processes, techniques and
manufacturing know-how and all trademarks, trade names and copyrights used in
connection with services now being or intended to be offered and sold by WVB or
the WVB Affiliates, as the case may be, except in each case where the failure to
own or have full and unrestricted rights within Brazil to such items would not
have a material adverse effect on WVB and the WVB Affiliates, taken as a whole.
Where registration of the intellectual property listed in clauses (a) and (b)
above is necessary in order to have full and unrestricted rights to such
intellectual property, such intellectual property has been duly registered with
the proper authorities in Brazil.
A true and complete list of (i) all patents, patent applications, patent
agreements, license agreements, proprietary information agreements,
confidentiality agreements, invention agreements, consulting agreements,
trademark registrations and applications therefor, trade names, service marks
and copyright registrations and applications therefor to which WVB or any WVB
Affiliate is a party or that are used in the operation of the Business and (ii)
any interference actions or adverse claims made or threatened in respect thereof
and any claims made or threatened for alleged infringement thereof are
specifically set forth on Schedule 3.19. To the best knowledge of WVB, neither
WVB nor any WVB Affiliate, in its operations, infringes any valid patent,
trademark, trade name, service mark or copyright of any other Person. Except as
set forth on Schedule 3.19, all agreements listed on Schedule 3.19 are valid and
enforceable, each of WVB and the WVB Affiliates has performed all material
obligations imposed upon it thereunder, and neither WVB nor any WVB Affiliate
nor, to the knowledge of WVB, any other party thereto is in default thereunder
in any material respect, nor is there any event that with the giving of notice
or lapse of time, or both, would constitute a material default thereunder by
WVB, any WVB Affiliate or, to the knowledge of WVB, any other party thereto.
Neither WVB nor any WVB Affiliate has received notice that any party to any such
agreement intends to cancel, terminate or refuse to renew the same or to
exercise or decline to exercise any option or other right thereunder. Neither
WVB nor any WVB Affiliate has entered into any agreement to indemnify any Person
against any claim or charge of infringement of any patents, trademarks, trade
names, copyrights, technology, know-how, processes or other intangible rights.
3.20 CUSTOMERS
Except as described on Schedule 3.20, none of the Founders, WVB or the WVB
Affiliates have received any customer complaints or expressions of customer
dissatisfaction, in writing or orally, of a material nature concerning the
service provided by WVB or any WVB Affiliate.
3.21 APPLICABLE LAWS
The Founders, WVB and the WVB Affiliates have complied, and are in
compliance, with the U.S. Foreign Corrupt Practices Act. Except where
noncompliance would not individually or in the aggregate have a material adverse
effect on WVB and the WVB Affiliates, taken as a whole, and except to the extent
provided in Section 3.13 and on Schedules 3.13 and 3.21, the Founders, WVB and
the WVB Affiliates have complied, and are in compliance, with all other
presently existing local and national laws, rules, ordinances, decrees and
orders applicable to the operation of the Business or to their owned or leased
properties. None of the Founders,
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WVB or any WVB Affiliate has reasonably been put on notice of any action or
omission which could be deemed an unasserted present or past unremedied failure
by the Founders, WVB or any WVB Affiliate, as the case may be, to comply with
any such laws, rules, ordinances, decrees and orders, other than actions or
omissions which WVB reasonably believes are not failures to comply. None of the
Founders or any director, officer, agent, employee or other Person acting on
behalf of any Founder, WVB or any WVB Affiliate has used any funds or given
anything of value, directly or indirectly, for contributions, payments, gifts or
entertainment or made any expenditures, directly or indirectly, to any
government official, political party or candidate for political office to
influence such Person or entity in the discharge of his, her or its official
duties. Each of WVB and the WVB Affiliates have financial controls and
accounting books and records reasonably designed to ensure that such books and
records accurately reflect corporate transactions and the disposition of assets
to the extent relating to WVB or the WVB Affiliates. None of the Founders or any
director, officer, agent, employee or other Person acting on behalf of any
Founder, WVB or any WVB Affiliate has accepted or received any unlawful
contributions, payments, gifts or expenditures in connection with the operation
of the Business.
3.22 INSURANCE
WVB has provided to Nextel true and complete copies of all insurance
policies relating to WVB, the WVB Affiliates and the Assets.
3.23 BROKERAGE
Neither WVB nor the Founders have retained any broker or finder in
connection with the transactions contemplated by this Agreement. Any brokerage
or finder's fee due to any broker or finder in violation of the foregoing
representation shall be paid by Telcom.
3.24 BUSINESS PLAN
WVB's business plan dated January 1996, which contains projections through
January 1, 2001, was prepared in good faith by Telcom using the assumptions set
forth therein. No representation or warranty is made with respect to such
business plan or projections other than as set forth in the preceding sentence.
3.25 S-4 REGISTRATION STATEMENT AND PROXY STATEMENT/PROSPECTUS
None of the information supplied or to be supplied by WVB for inclusion or
incorporation by reference in the S-4 Registration Statement or the Proxy
Statement/Prospectus will (a) in the case of the S-4 Registration Statement, at
the time it becomes effective, contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading or (b) in the case of the Proxy
Statement/Prospectus, at the time of mailing the Proxy Statement/Prospectus and
at the time consents of the Founders are obtained, contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. If at any time prior
to the Closing Date any event with respect to WVB or its officers and directors
shall occur that is required to be described in the Proxy Statement/Prospectus
or the S-4 Registration Statement, WVB shall notify Nextel thereof by reference
to this Section 3.25 and cooperate with Nextel in preparing and filing with the
SEC and, as required by law, disseminating to the Founders an amendment or
supplement which accurately describes such event or events in compliance with
all provisions of applicable law.
3.26 FULL DISCLOSURE
No information furnished by the Founders, WVB or the WVB Affiliates to
Nextel and its Affiliates in this Agreement (including, but not limited to, the
Financial Statements and all information in the Schedules and Exhibits) is false
or misleading in any material respect. There has been no omission on the part of
WVB or the WVB Affiliates to state a material fact necessary to make such
information provided to Nextel and its Affiliates not misleading.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF NEXTEL AND INDIMICH
To induce WVB to enter into this Agreement and the Founders to approve this
Agreement, Nextel and Indimich jointly and severally represent and warrant to
WVB and the Founders (which representations and warranties shall survive the
Closing as provided in Section 9.4) all as follows in this Article IV. The
contents of any particular Schedule to this Article IV shall not be deemed
included in any other Schedule unless specifically cross-referenced to that
Schedule.
4.1 ORGANIZATION, GOOD STANDING, ETC.
Each of Nextel and Indimich is a corporation duly organized, validly
existing and in good standing under the laws of its respective jurisdiction of
incorporation. Indimich has all requisite power and authority to own, operate
and lease its properties and assets and to carry on its business as now
conducted, and is duly qualified and in good standing in each jurisdiction in
which it owns or leases property or in which the nature of the business
transacted by it makes such qualification necessary. Indimich has no assets or
liabilities and has not conducted and conducts no business.
4.2 AUTHORIZATION, DUE EXECUTION AND BINDING EFFECT
Each of Nextel and Indimich has full power and authority to execute,
deliver and perform this Agreement, including approval of the Board of Directors
of Nextel. This Agreement has been duly executed and delivered by Nextel and
Indimich and is a legal, valid and binding obligation of Nextel and Indimich
enforceable in accordance with its terms.
4.3 NO APPROVALS OR NOTICES REQUIRED; NO CONFLICTS WITH INSTRUMENTS
The execution, delivery and performance of this Agreement by Nextel or
Indimich and the consummation of the transactions contemplated hereby do not and
will not (a) violate the corporate charter or other organizational documents of
Nextel or Indimich, (b) constitute a violation (with or without the giving of
notice or lapse of time, or both) of any law, rule, regulation, judgment,
injunction, order or decree applicable to Nextel or Indimich, (c) require any
consent, approval or authorization of any Person, governmental authority or
other organization or entity other than pursuant to the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), and except for
compliance with applicable securities laws and the filing of all documents
necessary to consummate the Merger with the Secretary of State of the State of
Delaware and the Virginia State Corporate Commission, or (d) result in a default
under, an acceleration or a termination of, or the creation in any party of the
right to accelerate, terminate, modify or cancel, any material agreement, lease,
note or other restriction, encumbrance, obligation or liability to which Nextel
or Indimich is a party or by which Nextel or Indimich is bound or to which their
assets are subject.
4.4 CLAIMS AND LEGAL PROCEEDINGS
There are no claims, actions, suits, arbitrations, proceedings or
investigations pending or, to the knowledge of Nextel or Indimich, threatened
against Nextel or Indimich, before or by any governmental or nongovernmental
department, commission, board, bureau, agency or instrumentality, or any other
Person, and there are no outstanding or unsatisfied judgments, orders, decrees
or stipulations to which Nextel or Indimich is a party, in each case that relate
to the transactions contemplated by this Agreement.
4.5 NEXTEL SEC FILINGS
All filings made by Nextel with the SEC pursuant to the Exchange Act were
complete and correct in all material respects as of the date filed and, as of
the date hereof, there are no facts that have not been publicly disclosed that
Nextel would be required to have disclosed if Nextel were making a public
offering of securities.
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4.6 NEXTEL COMMON STOCK
The Nextel Shares have been duly authorized and, when issued pursuant to
the terms hereof, will be validly issued and are fully paid and nonassessable.
4.7 BROKERAGE
Neither Nextel nor Indimich has retained any broker or finder in connection
with the transactions contemplated by this Agreement. Any brokerage or finder's
fee due to any broker or finder in violation of the foregoing representation
shall be paid by Nextel or Indimich.
4.8 S-4 REGISTRATION STATEMENT AND PROXY STATEMENT/PROSPECTUS
None of the information supplied or to be supplied by Nextel or Indimich
for inclusion or incorporation by reference in the S-4 Registration Statement or
the Proxy Statement/Prospectus will (a) in the case of the S-4 Registration
Statement, at the time it becomes effective, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading or (b) in the case of
the Proxy Statement/Prospectus, at the time of mailing the Proxy
Statement/Prospectus and at the time the consents of the Founders are obtained,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. If at any time prior to the Closing Date any event with respect to
Nextel or Indimich, their officers and directors or any of their Affiliates
shall occur that is required to be described in an amendment of, or a supplement
to, the Proxy Statement/Prospectus or the S-4 Registration Statement, Nextel
shall notify WVB thereof by reference to this Section 4.8 and, in the case of
the Proxy Statement/Prospectus or the S-4 Registration Statement, such event
shall be so described, and an amendment or supplement shall be promptly filed
with the SEC and, as required by law, disseminated to the Founders, and such
amendment or supplement shall comply with all provisions of applicable law. The
S-4 Registration Statement will comply (with respect to Nextel and Indimich) as
to form in all material respects with the provisions of the Securities Act. The
Proxy Statement/Prospectus will comply (with respect to Nextel and Indimich) in
all material respects with the requirements of the Exchange Act and the
applicable rules and regulations thereunder.
4.9 TAX
(a) Nextel is in "Control Of " Indimich (as such term is defined in Section
4.9(h).
(b) Nextel Common Stock is "voting stock" within the meaning of Section
368(a)(2)(E) of the Code.
(c) The liabilities of Indimich that the Surviving Corporation will assume
and the liabilities to which any transferred assets of Indimich may be subject
are or will be incurred by Indimich in the ordinary course of its business.
(d) Any cash that Indimich will distribute to the Founders in lieu of
fractional shares as provided for in Section 2.2.2(b) is being distributed
solely for the purpose of saving the Surviving Corporation the expense and
inconvenience of issuing and transferring fractional shares, and the
distribution of cash for fractional shares is not separately bargained-for
consideration.
(e) Except for the Nextel Common Stock that Nextel has or will contribute
to Indimich for purposes of effecting the Merger, Indimich has not acquired or
disposed of any assets and has not incurred or liquidated any liabilities in
anticipation of or in connection with the transactions contemplated by this
Agreement.
(f) Nextel has no plan or intention to (i) liquidate or merge the Surviving
Corporation into another corporation, (ii) sell, transfer, or otherwise dispose
of the stock of the Surviving Corporation or (iii) cause or allow the Surviving
Corporation to sell or otherwise dispose of its assets (or any of the assets
that the Surviving Corporation acquires from Indimich pursuant to the Merger
other than the Nextel Common Stock that Nextel will contribute to Indimich to
effect the Merger) other than dispositions of assets made in the ordinary
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course of WVB's business; provided, however, that, notwithstanding clauses (ii)
and (iii) hereof, Nextel may transfer all or part of the stock of WVB, or WVB
may transfer all or part of its assets, to a corporation "Controlled By" (as
defined in Section 4.9(h) below) Nextel or WVB, as the case may be, in a
transaction that maintains the tax-free status of the Merger (to the Founders)
by reason of Section 368(a)(2)(C) of the Code. Nextel has no plan or intention
to cause or allow any direct or indirect subsidiary of WVB to sell, transfer or
otherwise dispose of any material part of its assets other than transfers made
in the ordinary course of business and transfers of the stock of one member of
the WVB Group to another member of the WVB Group or to a corporation Controlled
By a member of the WVB Group.
(g) Neither Nextel nor Indimich is an "investment company," as defined in
Section 368(a)(2)(F)(iii) of the Code.
(h) For purposes of the representations and warranties in this Section 4.9,
(i) the term "Control" is defined in Section 368(c) of the Code and (ii) the
terms "Controlled By" and "Control Of " are defined consistently with the term
"Control."
ARTICLE V
FURTHER AGREEMENTS
Each of the parties hereto agrees to perform and observe the following
agreements applicable to it:
5.1 SCHEDULES
(a) All representations and warranties herein by WVB shall apply to any
exhibits, schedules and certificates delivered by WVB or any officer thereof to
Nextel, and each such certificate shall be deemed to be a representation by WVB
as to the matters set forth therein. All representations and warranties herein
by Nextel and Indimich shall apply to any exhibits, schedules and certificates
delivered by Nextel or Indimich or any officer thereof to WVB, and each such
certificate shall be deemed to be a representation by Nextel and Indimich as to
the matters set forth therein.
(b) On or prior to the Closing Date, WVB may deliver to Nextel one or more
Schedules to this Agreement that are revised and updated to reflect changes to
the operations or condition of WVB and the WVB Affiliates between the date
hereof and the Closing Date. The delivery of any such revised Schedule shall not
affect the rights of Nextel and Indimich under Article VI, but if the Closing
shall occur, the revised Schedules shall be deemed to supersede the Schedules
delivered herewith, but only with respect to the representations and warranties
given as of the Closing Date.
5.2 ACCESS
From the date of this Agreement to and including the Closing Date, WVB
shall (and shall cause the WVB Affiliates to) grant Nextel and its agents,
employees, accountants and attorneys reasonable access during normal business
hours to, and the opportunity to examine and make copies of, all of the books,
records, documents, instruments and papers of WVB and the WVB Affiliates, and
the right to inspect all of their operations, properties and assets at any
reasonable time and provide any authorizations necessary to examine the status
of the Licenses with the Brazilian Ministry of Communications.
5.3 MANAGEMENT INFORMATION
From the date of this Agreement to and including the Closing Date, WVB
shall (and shall cause the WVB Affiliates to) provide to Nextel all material
information specifically requested by Indimich regarding the operation of the
Business during such period. Any such information shall be subject to the
Confidentiality Agreement.
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5.4 ADVICE OF CLAIMS
From the date of this Agreement to and including the Closing Date, WVB
shall (and shall cause the WVB Affiliates to) promptly advise Nextel in writing
if it has notice or knowledge of the commencement or threat of any claims,
litigation or proceedings against or affecting the Founders, WVB or the WVB
Affiliates or any rulings, decrees or other material developments in any claim,
action or suit described on Schedule 3.16 or arising after the date hereof.
5.5 CONDUCT OF THE BUSINESS
From the date hereof until the Closing Date, WVB shall (and shall cause the
WVB Affiliates to) conduct the Business in the ordinary course consistent with
past practices and use its best efforts to preserve intact the business
organizations and relationships with third parties and to keep available the
services of the present employees of the Business. Without limiting the
generality of the foregoing, from the date hereof until the Closing Date, WVB
shall not and will ensure that the WVB Affiliates shall not:
(a) acquire assets from any other Person having a value individually or in
the aggregate in excess of $3 million, except pursuant to existing contracts or
commitments;
(b) sell, lease, license or otherwise dispose of any Assets except (i)
pursuant to existing contracts or commitments and (ii) in the ordinary course
consistent with past practices;
(c) issue any additional shares of capital stock;
(d) make any payments of dividends or other distributions with respect to
its capital stock; or
(e) agree or commit to do any of the foregoing.
WVB and the WVB Affiliates shall to the best of their respective abilities
(i) preserve and protect the right of WVB and the WVB Affiliates to use all the
Channels as currently intended and (ii) take action pursuant to the policies set
forth on Schedule 3.21 to satisfy all applicable build-out and loading
requirements. WVB shall immediately notify Nextel if it receives notification
that any of the Licenses with respect to any Channels may be subject to
revocation or if the policies set forth on Schedule 3.21 are not complied with
in any material respect.
WVB shall not (and, by their approval of this Agreement, the Founders agree
not to) (i) take or agree or commit to take any action that would make any
representation or warranty of WVB hereunder inaccurate in any respect at, or as
of any time prior to, the Closing Date or (ii) omit or agree or commit to omit
to take any commercially reasonable action necessary to prevent any such
representation or warranty from being inaccurate in any respect at any such
time.
5.6 COMPLIANCE WITH LAWS
WVB agrees that it and any director, officer, agent, employee or other
Person acting on its behalf or on behalf of any of the WVB Affiliates (a) will
not be involved in the offering, paying or giving of anything of value, either
directly or indirectly, to a government official, political party or candidate
for political office to influence such Person or entity in the discharge of his,
her or its official duties, (b) will not engage in any such unlawful conduct
during the time of carrying out their duties, (c) will maintain accounting books
and records in reasonable detail and institute internal controls to ensure that
such books and records accurately reflect corporate transactions and the
disposition of assets to the extent relating to WVB or the WVB Affiliates, and
(d) except as permitted by the policies set forth on Schedule 3.21, will not,
directly or indirectly, take any action or fail to take any commercially
reasonable action in each case that could result in the loss of the benefits of
any License. WVB further agrees that it will cause the WVB Affiliates to comply
with the preceding sentence.
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5.7 INSURANCE AND LOSS OF OR DAMAGE TO ASSETS
(a) WVB shall not, and shall not permit any WVB Affiliate to, decrease the
insurance coverage it maintained prior to the date hereof in respect of the
Business from the period commencing on the date hereof and ending on the Closing
Date.
(b) WVB shall give Indimich prompt written notice of (i) any loss, damage
or destruction to any material tangible Assets occurring on or after July 31,
1996 and on or prior to the Closing Date, (ii) the estimated value of the
portion of such Assets so lost, damaged or destroyed, and (iii) the estimated
cost of repair, replacement or reconstruction thereof.
5.8 CONFIDENTIALITY
The Confidentiality Agreement among Telcom, WVB, Wireless Ventures of
Argentina, L.L.C. and McCaw International, Ltd. dated as of the date hereof (the
"Confidentiality Agreement") shall remain in full force and effect in accordance
with its terms and shall apply to all documents and information supplied in
connection herewith.
5.9 FOUNDERS MEETING
WVB will take all action necessary in accordance with applicable law,
including but not limited to the U.S. federal and state securities laws, and its
Articles of Incorporation and Bylaws to call and hold a meeting of the Founders,
or obtain written consents, to approve this Agreement and the transactions
contemplated hereby. Subject to the fiduciary duties of WVB's Board of Directors
under applicable law as advised by counsel, the Board of Directors of WVB shall
recommend and declare advisable such approval, and WVB shall take all lawful
action to solicit, and use all reasonable efforts to obtain, such approval.
5.10 REGISTRATION STATEMENT/PROXY MATERIALS
Nextel and WVB shall use their respective reasonable best efforts to
prepare and file with the SEC within 15 days of the date hereof preliminary
proxy materials that will constitute a proxy statement in connection with the
vote of the Founders with respect to this Agreement and the transactions
contemplated hereby, together with any amendments thereof or supplements thereto
(in each case in the form or forms mailed to the Founders, the "Proxy
Statement/Prospectus"). Nextel will also, promptly after the date hereof,
prepare and file with the SEC a registration statement on Form S-4 (the "S-4
Registration Statement") containing the Proxy Statement/Prospectus, in
connection with the registration under the Securities Act of the Nextel Shares
issuable in exchange for the WVB Common Stock and the other transactions
contemplated hereby. Nextel and WVB will use all reasonable efforts to cause the
Proxy Statement/Prospectus to be mailed to the Founders at the earliest
practicable date. If at any time prior to the Closing Date any event relating to
or affecting Nextel or WVB shall occur as a result of which it is necessary, in
the opinion of counsel for Nextel or of counsel for WVB, to supplement or amend
the S-4 Registration Statement in order to make such document not misleading in
light of the circumstances existing at the time approval of the Founders is
sought, Nextel and WVB will forthwith prepare and file with the SEC an amendment
or supplement to the S-4 Registration Statement (which may be accomplished, to
the extent provided by law, rule or regulation, by including such information in
a filing made with the SEC under the Exchange Act that is incorporated by
reference into the S-4 Registration Statement) so that such document, as so
supplemented or amended, will not contain any untrue statement of a material
fact or omit to state any material fact necessary in order to make the
statements therein, in light of the circumstances existing at such time, not
misleading. The Founders shall cause KPMG Peat Marwick LLP to deliver to Nextel
on the date that the S-4 Registration Statement is declared effective by the SEC
a comfort letter of the type customarily delivered in transactions of this type
(the "Original Letter") and on the Closing Date a "bring-down" comfort letter
confirming that the statements and conclusions set forth in the Original Letter
are true and correct as of the Closing Date.
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5.11 NO SOLICITATIONS
(a) WVB shall not, directly or indirectly, through any officer, director,
employee, representative or agent of WVB or any of the WVB Affiliates, solicit
or encourage the initiation of any inquiries, discussions, negotiations or
proposals regarding any merger, sale of substantial assets, sale of shares of
capital stock (including without limitation by way of a tender offer) or similar
transactions involving WVB or any WVB Affiliates (any of the foregoing inquiries
or proposals being referred to herein as an "Acquisition Proposal"); provided,
however, that nothing contained in this Agreement shall prevent the Board of
Directors of WVB from referring any third party to this Section 5.11 or from
making a copy of this Section 5.11 available to any third party. Nothing
contained in this Section 5.11 shall prevent the Board of Directors of WVB from
considering, negotiating, approving and recommending to the Founders (after
consultation with its financial advisors, and determining after consulting with
such advisers and upon advice of counsel that the Board of Directors is required
to do so in order to discharge properly its fiduciary duties) an unsolicited
bona fide Acquisition Proposal which the Board of Directors of WVB determines in
good faith would result in a transaction more favorable to the Founders from a
financial point of view than the transaction contemplated by this Agreement (any
such Acquisition Proposal being referred to herein as a "Superior Proposal").
(b) WVB shall immediately notify Nextel after receipt of any Acquisition
Proposal, any material change to an Acquisition Proposal already made or any
request for nonpublic information relating to WVB or any of the WVB Affiliates
in connection with an Acquisition Proposal or for access to the properties,
books or records of WVB or any of the WVB Affiliates by any Person that informs
the Board of Directors of WVB or such WVB Affiliate that it is considering
making, has made, or has made a material change to, an Acquisition Proposal.
Such notice to Nextel shall be made orally and in writing and shall indicate in
reasonable detail the identity of the offeror and the terms and conditions of
such proposal, inquiry or contact.
(c) If the Board of Directors of WVB or of any WVB Affiliate receives a
request for material nonpublic information by a party who makes a bona fide
Acquisition Proposal, and the Board of Directors of WVB determines that such
proposal is a Superior Proposal then, and only in such case, WVB may, subject to
the execution of a confidentiality and standstill agreement substantially
similar to that then in effect between WVB and Nextel, provide such party with
access to information regarding WVB or the WVB Affiliates.
5.12 RULE 145 AFFILIATES
WVB shall identify in a letter to Nextel all persons who will be at the
Closing Date "affiliates" of WVB, as such term is used in Rule 145 under the
Securities Act. WVB shall use all reasonable efforts to cause its affiliates to
deliver to Nextel on or prior to the Closing Date a written agreement
substantially in the form attached as Exhibit 5.12 (each, an "Affiliate
Agreement"). If any affiliate refuses to provide an Affiliate Agreement, Nextel
shall, in lieu of receipt of such written agreement, be entitled to place
appropriate legends on the certificates evidencing the Nextel Shares to be
received by such affiliate pursuant to the terms of this Agreement, and to issue
appropriate stock transfer instructions to the transfer agent for Nextel Common
Stock to the effect that the Nextel Shares received or to be received by such
affiliate pursuant to the terms of this Agreement may only be sold, transferred
or otherwise conveyed, and the holder thereof may only reduce his, her or its
interest in or risks relating to such shares of Nextel Common Stock, pursuant to
an effective registration statement under the Securities Act, in compliance with
Rule 145, as amended from time to time, or in a transaction which, in the
opinion of legal counsel reasonably satisfactory to Nextel, is exempt from the
registration requirements of the Securities Act. The Proxy Statement/Prospectus
and the S-4 Registration Statement shall disclose the foregoing in a reasonably
prominent manner.
5.13 TAX COVENANT
(a) For at least six months following the Merger, (i) WVB will hold at
least 90 percent of the fair market value of the net assets and at least 70
percent of the fair market value of the gross assets that it held immediately
prior to the Merger and (ii) WVB will retain at least 90 percent of the fair
market value of Indimich's net assets and at least 70 percent of the fair market
value of Indimich's gross assets that Indimich held immediately prior to the
Merger. For purposes of this covenant, amounts paid by WVB to dissenters,
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amounts paid by WVB or Indimich to shareholders who receive cash or other
property in connection with the transactions contemplated by this Agreement,
amounts used by WVB or Indimich to pay reorganization expenses, and all
redemptions and distributions of property by WVB or Indimich in connection with
the transactions contemplated by this Agreement will be included as "assets"
immediately prior to the Merger.
(b) Nextel, WVB and Indimich will pay their respective expenses, if any,
incurred in connection with the Merger.
(c) Nextel will continue the business operated by WVB immediately prior to
the Merger, or Nextel will use in a business a significant portion of the
business assets held by WVB immediately prior to the Merger. For purposes of
this Section 5.13, the term "WVB" shall include each of WVB's direct and
indirect subsidiaries.
(d) For a period of six months following the Merger, Nextel will not
effect, directly or indirectly, a Prohibited Transaction without the express
written consent of Telcom, which consent shall not be unreasonably withheld.
(e) For federal income tax purposes, the parties will treat the Merger as a
transaction described in Sections 368(a)(1)(A) and 368(a)(2)(E) of the Code
pursuant to which the Founders exchange their shares of WVB Common Stock for
Nextel Common Stock without the recognition of taxable gain, and the parties
shall report the Merger and the related transactions contemplated by this
Agreement in their Tax Returns in a manner consistent with such treatment.
(f) For purposes of the covenants in this Section 5.13, the term "control"
is defined in Section 368(c) of the Code and the terms "controlled by," "control
of," and similar terms are defined consistently with the term "control."
5.14 NEXTEL COMMON STOCK
During the 20 trading days following but excluding the date hereof, neither
the Founders nor any Affiliates thereof shall engage in any transaction in or
with respect to Nextel Common Stock, including but not limited to purchasing,
selling, selling short, or purchasing or selling options to purchase, Nextel
Common Stock in a manner that reasonably could be expected to have a material
effect on the price of the Nextel Common Stock on the Nasdaq National Market.
5.15 OTHER COOPERATION
All parties shall use their reasonable best efforts to prepare and file
within 15 days of the date hereof filings required by the HSR Act, and will
promptly take, and fully cooperate with the other parties and their legal
counsel and accountants in connection with, any other steps reasonably required
to be taken as part of the obligations of the parties under this Agreement or to
promptly satisfy the conditions precedent hereunder.
5.16 CERTAIN BRAZILIAN REGULATORY ISSUES
(a) WVB has provided Nextel copies of (i) that certain letter dated October
11, 1996 addressed to Radio Telecomunicacoes do Brasil Ltda. ("Radio-Tel") from
the Brazilian Ministry of Communications (the "Ministry") (the "Ministry
Letter"), (ii) that certain internal memorandum of the Ministry written by
Esmeralda Eudoxia Goncalves dated July 17, 1996 (the "Ministry Memorandum"), and
(iii) that certain letter from Mr. Frank Marques dated October 23, 1996
responding to the Ministry Letter (the "WVA Response"). (The issue of whether
the Services Agreements between any WVB Affiliate and AirLink are not in
compliance with applicable regulation, as referenced in the Ministry Letter, the
Ministry Memoranda and the WVA Response, is referred to as the "Regulatory
Issue.")
(b) WVB shall exercise its commercially reasonable best efforts to secure a
satisfactory resolution of the Regulatory Issue. At any time prior to the
three-month anniversary of the date hereof, WVB may propose in writing to Nextel
how Nextel may secure the Satisfactory Regulatory Comfort (as defined below)
(the "WVB Proposal"). Within 10 business days of Nextel's receipt of the WVB
Proposal, Nextel shall notify WVB in
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writing whether Nextel accepts the WVB Proposal as constituting Satisfactory
Regulatory Comfort, and if Nextel rejects the WVB Proposal, Nextel shall include
a detailed explanation of the reasons for such rejection. If Nextel declines to
accept the WVB Proposal, then WVB shall be provided an additional period of 10
business days to allow it to provide supplemental comfort with respect to the
Regulatory Issue (the "Supplemental WVB Proposal"). Within five business days of
receipt thereof, Nextel shall provide its written response as whether it accepts
the Supplemental WVB Proposal as constituting Satisfactory Regulatory Comfort.
(c) If the Closing occurs, then Nextel shall be deemed to have released the
Indemnifying Founders from any liability or obligations they might otherwise
incur pursuant to this Agreement in connection with the Regulatory Issue,
whether such issue arises in connection with Radio-Tel or any other WVB
Affiliate.
5.17 BRAZILIAN CERTIFICATES
To the extent that Nextel shall not have obtained on or prior to the
Closing Date the negative certificates of Brazilian authorities listed on
Exhibit 5.17 in a form reasonably satisfactory to Nextel, WVB shall use its best
efforts to obtain such certificates.
ARTICLE VI
CONDITIONS PRECEDENT TO OBLIGATIONS OF NEXTEL AND INDIMICH
The obligations of each of Nextel and Indimich to perform and observe the
covenants, agreements and conditions hereof to be performed and observed by it
on or before the Closing Date shall be subject to the satisfaction of the
following conditions, any of which may be expressly waived in writing by Nextel:
6.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES
The representations and warranties of WVB contained herein (including
applicable Schedules hereto) shall have been true in all material respects when
made and shall be true in all material respects on and as of the Closing Date
with the same force and effect as though made on and as of such date, except as
affected by transactions contemplated hereby and except to the extent that any
such representations and warranties shall have been made as of a specified date,
in which case such representations and warranties shall have been true as of the
specified date.
6.2 PERFORMANCE OF AGREEMENT
WVB shall have performed in all material respects all obligations and
agreements and complied in all material respects with all covenants and
conditions contained in this Agreement to be performed and complied with it on
or prior to the Closing Date.
6.3 APPROVALS AND CONSENTS
All material approvals and consents listed on Schedule 3.3 shall have been
obtained.
6.4 FOUNDERS' APPROVAL
This Agreement and the transactions contemplated hereby shall have been
duly approved or ratified by the requisite holders of WVB Common Stock in
accordance with applicable provisions of the VSCA and the Articles of
Incorporation and Bylaws of WVB.
6.5 SHAREHOLDERS AGREEMENT
WVB, the Founders and Nextel or any Affiliates of Nextel designated by it
to hold the WVB Common Stock shall have entered into a Shareholders Agreement
(the "Shareholders Agreement") in substantially the form attached hereto as
Exhibit 6.5.
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6.6 OPINION OF WVB COUNSEL
Indimich shall have received opinions of counsel to WVB in the United
States, Brazil and the British Virgin Islands reasonably acceptable to Nextel in
substantially the form attached hereto as Exhibit 6.6.
6.7 CONFIDENTIALITY, NONCOMPETITION AND PROPRIETARY INFORMATION AGREEMENTS
On or before the Closing Date, the Founders, the WVB Affiliates Controlled
by WVB and all Affiliates (other than members of Telcom), officers and directors
thereof shall have entered into confidentiality agreements, noncompetition
agreements and proprietary information agreements relating to paging and SMR
services and operations in Brazil substantially in the form attached hereto as
Exhibit 6.7.
6.8 RESIGNATIONS OF DIRECTORS, OFFICERS, EMPLOYEES, INDEPENDENT CONTRACTORS
AND CONSULTANTS
On or before the Closing Date, the resignation of all directors, officers,
employees, independent contractors and consultants of WVB and the WVB Affiliates
that Nextel shall have requested shall have been obtained.
6.9 LEGAL PROCEEDINGS
No law, regulation, administrative ruling or order of any court or
administrative agency of competent jurisdiction shall be in effect that enjoins,
restrains or prohibits consummation of this Agreement, and no litigation,
investigation or administrative proceeding shall be reasonably likely to enjoin,
restrain or prohibit consummation of this Agreement.
6.10 S-4 REGISTRATION STATEMENT AND LISTING
The S-4 Registration Statement shall have been declared effective by the
SEC under the Securities Act and shall be effective on the Closing Date. No stop
order suspending effectiveness shall have been issued by the SEC, no action,
suit, proceeding or investigation by the SEC to suspend the effectiveness
thereof shall have been initiated and be continuing, and all necessary approvals
under state securities laws or the Securities Act or Exchange Act relating to
the issuance or trading of the Nextel Common Stock shall have been received. The
listing of the Nextel Shares on the Nasdaq National Market shall have been
approved.
6.11 TITLE
To the extent any such Liens exist, WVB shall have caused WVB, Telcom and
the WVB Affiliates to have obtained the release of all material Liens on the
Assets, other than Permitted Liens. WVB shall have supplied to Indimich evidence
satisfactory to Nextel pursuant to Section 6.16 establishing WVB's, Telcom's and
the WVB Affiliates' good and marketable title to the Assets, free and clear of
all Liens, other than Permitted Liens.
6.12 WVB OFFICERS' CERTIFICATES
Nextel shall have received a certificate from the President and the
Secretary of WVB dated the Closing Date, in substantially the form attached as
Exhibit 6.12, certifying that (a) the conditions set forth in this Article VI
have been fulfilled and (b) the representations and warranties of WVB herein are
true and correct in all material respects as of the Closing Date.
6.13 NO CHANGE IN POLITICAL OR ECONOMIC CONDITIONS IN BRAZIL
Since the date of this Agreement, in the reasonable opinion of Nextel,
there shall have been no change in political or economic conditions in Brazil
that has had or could reasonably be expected to have a material adverse effect
on the Business, including, but not limited to, any material change in any
material law or regulation relating to SMR.
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6.14 AFFILIATE TRANSACTIONS
All loans and other transactions between WVB and the WVB Affiliates, on the
one hand, and the Founders or their Affiliates, on the other hand (including,
but not limited to, the Master Service Agreement and any shareholders agreement
between WVB and the Founders) shall have been terminated.
6.15 RULE 145 AFFILIATE AGREEMENTS
Nextel shall have received an executed Affiliate Agreement from each Rule
145 affiliate of WVB.
6.16 DOCUMENTATION RELATING TO LICENSES
Nextel shall have received a true and complete copy of each document
granting the License with respect to each Channel.
6.17 NEGATIVE PLEDGE AGREEMENT
WVB, Telcom and Nextel shall have entered into a Negative Pledge Agreement
in substantially the form attached hereto as Exhibit 6.17.
6.18 BRAZILIAN REGULATORY ISSUES
Subject to the provisions of Section 5.16, Nextel shall have received
comfort in form and in substance, reasonably satisfactory to it, with respect to
the resolution of the Regulatory Issue (the "Satisfactory Regulatory Comfort").
ARTICLE VII
CONDITIONS PRECEDENT TO OBLIGATIONS OF WVB
The obligations of WVB to perform and observe the covenants, agreements and
conditions hereof to be performed and observed by WVB on or before the Closing
Date shall be subject to the satisfaction of the following conditions, any of
which may be expressly waived in writing by WVB:
7.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES
The representations and warranties of Nextel and Indimich contained in
Article IV shall have been true in all material respects when made and shall be
true in all material respects on and as of the Closing Date with the same force
and effect as though made on and as of such date, except as affected by
transactions contemplated hereby and except to the extent that such
representations and warranties shall have been made as of a specified date, in
which case such representations and warranties shall have been true as of the
specified date.
7.2 PERFORMANCE OF AGREEMENT
Nextel and Indimich shall have performed in all material respects all
obligations and agreements and complied in all material respects with all
covenants and conditions contained in this Agreement to be performed and
complied with by them on or prior to the Closing Date.
7.3 APPROVALS AND CONSENTS
All material approvals and consents from third parties listed on Schedule
3.3 shall have been obtained.
7.4 FOUNDERS' APPROVAL
This Agreement and the transactions contemplated hereby shall have been
duly approved or ratified by the Founders in accordance with applicable
provisions of the VSCA and the Articles of Incorporation and Bylaws of WVB.
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7.5 SHAREHOLDERS AGREEMENT
WVB, the Founders and Indimich or any Affiliates of Indimich designated by
it to hold the WVB Common Stock shall have entered into the Shareholders
Agreement.
7.6 NEXTEL AND INDIMICH OFFICERS' CERTIFICATE
The Founders shall have received certificates of a Vice President and the
Secretary of Nextel and of the President and Secretary of Indimich, dated the
Closing Date, in substantially the form attached hereto as Exhibit 7.6,
certifying that all the conditions set forth in this Article VII have been
fulfilled and the representations and warranties of Nextel and Indimich,
respectively, herein are true and correct as of the Closing Date.
7.7 LEGAL PROCEEDINGS
No law, regulation, administrative ruling or order of any court or
administrative agency of competent jurisdiction shall be in effect that enjoins,
restrains or prohibits consummation of this Agreement, and no litigation,
investigation or administrative proceeding shall reasonably likely to be pending
or threatened that would enjoin, restrain or prohibit consummation of this
Agreement.
7.8 S-4 REGISTRATION STATEMENT AND LISTING
The S-4 Registration Statement shall have been declared effective by the
SEC under the Securities Act and shall be effective on the Closing Date. No stop
order suspending effectiveness shall have been issued by the SEC, no action,
suit, proceeding or investigation by the SEC to suspend the effectiveness
thereof shall have been initiated and be continuing, and all necessary approvals
under state securities laws or the Securities Act or Exchange Act relating to
the issuance or trading of the Nextel Common Stock shall have been received. The
listing of the Nextel Shares on the Nasdaq National Market shall have been
approved.
7.9 OPINION OF NEXTEL COUNSEL
WVB shall have received an opinion of counsel to Nextel reasonably
acceptable to WVB substantially in the form attached hereto as Exhibit 7.9.
7.10 NO MATERIAL ADVERSE CHANGE
Since the date of this Agreement, there shall have been no material adverse
change with respect to Nextel that would be required to be publicly disclosed by
Nextel if Nextel were making a public offering of securities.
7.11 TRANSFER OF INTERESTS OF WVB AFFILIATES
All interests in the WVB Affiliates held by Telcom or its Affiliates or by
individuals who are acting as nominees of Telcom or any of its Affiliates shall
have been transferred to Persons designated by Telcom.
7.12 TERMINATION OF POWERS OF ATTORNEY
All powers of attorney relating to the WVB Affiliates and designated for
termination at least 10 days prior to the Closing Date by Nextel shall have been
terminated.
ARTICLE VIII
NONCOMPETITION
8.1 NONCOMPETITION
(a) By their approval of this Agreement, the Founders agree that, until the
earlier of (i) one year following termination of the Shareholders Agreement or
(ii) termination of this Agreement pursuant to
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Article X, neither the Founders nor any Affiliate thereof shall in any way, by
action or inaction, directly or indirectly, for itself or for the benefit of any
other Person, own, manage, operate, join, Control or participate in the
ownership, management, operation or Control of, any Person that competes with
WVB or any Affiliate thereof, or agrees to do any of the foregoing, in the
business of SMR or paging in Brazil, other than wireless radio engineering,
design or program management services and the manufacture and sale of related
software and hardware products; provided, further, that neither the Founders nor
any Affiliate thereof may maintain an equity interest in any Person in which it
owns an equity interest as of the date hereof, which equity interest entitles
any of the Founders or their Affiliates to control the policymaking or
day-to-day operations of such Person or in connection with which any of the
Founders or their Affiliates have a representative on the board of directors, if
such Person elects to engage in the business of cellular communications or
Personal Communications Systems ("PCS") in Brazil. Notwithstanding the
foregoing, the Founders may engage in the business of SMR with respect to any
interests in entities or Licenses acquired from WVB pursuant to the provisions
of Section 2.4 hereof.
(b) Until the earlier of (i) one year following termination of the
Shareholders Agreement or (ii) termination of this Agreement pursuant to Article
X, neither Nextel nor any direct or indirect subsidiary thereof shall in any
way, by action or inaction, directly or indirectly, for itself or for the
benefit of any other Person, own, manage, operate, join, Control or participate
in the ownership, management, operation or Control of any Person that competes
with WVB or any Affiliate thereof, or agrees to do any of the foregoing, in the
business of SMR or paging in Brazil; provided, further, that neither Nextel nor
any direct or indirect subsidiary thereof may maintain an equity interest in any
Person in which it owns an equity interest as of the date hereof, which equity
interest entitles Nextel or any of its direct or indirect subsidiaries to
control the policymaking or day-to-day operations of such Person or in
connection with which any of the Founders or their Affiliates have a
representative on the board of directors, if such Person elects to engage in the
business of cellular communications or PCS in Brazil.
8.2 SPECIFIC PERFORMANCE
The parties hereto acknowledge that it may be impossible to measure in
money the damages that any party may incur as a result of another party's
violation of any provision of this Article VIII. Consequently, in any action
specifically to enforce any provision of this Agreement, each party hereby
waives any claim or defense therein that an adequate remedy at law or in damages
exists. Each party further agrees that the other parties shall be entitled to
injunctive relief, specific performance or other equitable relief to prevent
violation of any provision of this Agreement.
ARTICLE IX
INDEMNIFICATION AND SURVIVAL OF WARRANTIES
9.1 INDEMNIFICATION BY THE FOUNDERS
By their approval of this Agreement, each Indemnifying Founder agrees,
jointly and severally, to indemnify and hold harmless, on an after-tax basis,
Nextel and any of its Affiliates, their respective successors and permitted
assigns, and the officers, directors, Affiliates, employees, Controlling Persons
and agents of the foregoing and to hold each such party harmless against and in
respect of any and all losses, damages, costs and expenses, including attorneys'
fees ("Damages"), incurred by any such party by reason of (a) a breach of any of
the representations or warranties made in this Agreement by WVB, (b) any item
disclosed on Schedule 3.16 or 3.20 or any Fistel payment payable with respect to
any period prior to the Closing Date and not reflected in the Closing Balance
Sheet, whether or not disclosed in the Schedules hereto, (c) the breach of any
covenant contained herein by WVB prior to the Closing, or (d) the breach of
undertakings of WVB or the Founders in this Agreement or any other document,
supplement, instrument, agreement, letter, amendment or assignment executed in
connection herewith, or in any officers' certificate or other certificate
delivered to Nextel or its Affiliates at or in connection with the Closing;
provided, however, that (a) the Indemnifying Founders shall not be obligated to
make any payments under this Section 9.1 unless and until the amount of
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Damages exceeds $500,000, after which the Indemnifying Founders shall be
obligated to pay the entire amount of such Damages, including the first
$500,000, and (b) the remedies set forth in Section 2.4 shall be the sole
remedies for any Claim relating to (i) WVB's ability to acquire, directly or
indirectly, the remaining interests in any Persons owning Licenses, (ii)
frequency interference and (iii) revocation of Licenses. The aggregate
individual liability of each Indemnifying Founder under this Article IX and
Sections 2.4 and 2.5 shall be limited to such Indemnifying Founders' Pro Rata
Share. As between themselves, the Indemnifying Founders agree that if any
Indemnifying Founder shall become obligated to make any indemnification payment
hereunder or under Sections 2.4 or 2.5, each Indemnifying Founder shall
contribute to such payment pro rata in accordance with his, her or its ownership
interests in WVB as of the Closing Date. The Indemnifying Founders may satisfy
their obligations hereunder in cash or in Nextel Common Stock, based on the
average of the closing prices of the Nextel Common Stock on the principal
trading market on which such shares are traded for the 20 trading days prior to
the date of transfer thereof.
9.2 INDEMNIFICATION BY NEXTEL
Nextel agrees to indemnify and hold harmless, on an after-tax basis, WVB
and the Founders, their respective successors and permitted assigns and the
officers, directors, affiliates, employees, Controlling Persons and agents of
the foregoing and to hold each such party harmless against and in respect of any
and all Damages incurred by such party by reason of a breach of any of the
representations or warranties made by Nextel and Indimich in this Agreement or
Damages suffered as a result of the breach of undertakings of Nextel and
Indimich in any other document, supplement, instrument, agreement, letter,
amendment or assignment executed in connection herewith, or in any officers'
certificate or other certificates delivered to the Founders at or in connection
with the Closing; provided, however, that (a) Nextel shall not be obligated to
make any payments under this Section 9.2 unless and until the amount of Damages
exceeds $500,000, after which Nextel shall be obligated to pay the entire amount
of such Damages, including the first $500,000, and (b) Nextel's maximum
liabilities under this Section 9.2 shall not exceed $186,300,000.
9.3 PROCEDURE
With respect to the claims made by third parties, if Nextel, Indimich, any
Founder, WVB or the WVB Affiliates are threatened with any claim, or any such
claim is presented to or any action or proceeding commenced, that may give rise
to the right of indemnification hereunder, Nextel, Indimich, such Founder, WVB
or the WVB Affiliates, as the case may be (the "Indemnitee"), will give written
notice thereof promptly (and in no event later than the last survival date of
the representation and warranty for the breach of which indemnification is
sought) to the party or parties bearing the indemnification obligation (the
"Indemnifying Party"); provided, however, that the failure to give notice in
accordance with this Section 9.3 shall not prevent enforcement hereunder if such
failure is not prejudicial to the Indemnifying Party. The Indemnifying Party
shall have the right to participate in the defense of such claim, action or
proceeding, and, to the extent the Indemnifying Party so desires, jointly with
any other Indemnifying Party similarly notified, to assume the defense thereof
with counsel mutually satisfactory to such parties and the Indemnitee, in which
case every Indemnitee shall have the right to participate through counsel of its
own choosing (and whose fees shall by paid by such Indemnitee). If the
Indemnifying Party and the Indemnitee agree upon mutually satisfactory counsel
to assume the defense, the Indemnifying Party shall assume the expense of such
counsel's fees and shall no longer assume the expense of the Indemnitee's
attorneys' fees. In the event the Indemnifying Party undertakes to compromise or
defend any such liability, the Indemnifying Party shall so notify the Indemnitee
in writing promptly of its intention to do so, and the Indemnitee shall
cooperate with the Indemnifying Party and its counsel in the compromising of or
the defending against any such liabilities or claims, at the expense of the
Indemnifying Party. Such cooperation shall include, but shall not be limited to,
the provision to the Indemnifying Party of reasonable access to the Indemnitee's
business records, research, documents and employees as they relate to the
defense of any indemnified claim. In response to a bona fide settlement offer,
the Indemnifying Party may settle the monetary portion of an indemnifiable
matter that it has duly elected to contest without the consent of the Indemnitee
unless such settlement has an adverse effect upon the Indemnitee, in which case
such matters shall be settled only with the consent of the Indemnitee; provided,
however, that the Indemnifying Party shall not have the right to agree to a
settlement involving injunctive or
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other equitable relief without obtaining the prior written consent of the
Indemnitee. In the event the Indemnitee declines to consent to the monetary
settlement described in the preceding sentence, then the Indemnitee shall have
no right to indemnification beyond, and the Indemnifying Party shall have no
obligation to pay damages and attorneys' fees hereunder in excess of, the amount
of the proposed settlement.
9.4 SURVIVAL
The covenants, agreements, representations and warranties made by the
parties in or pursuant to this Agreement shall survive the Closing for 18
months, except as otherwise set forth herein, and except that (a)
indemnification pursuant to Article IX relating to the representations and
warranties contained in Sections 3.11 and 4.9 shall survive until expiration of
the statute of limitations applicable to the matters covered thereby (giving
effect to any waiver, mitigation or extension thereof), if later, and (b) the
agreements contained in this Article IX shall survive indefinitely. Any claim
for indemnification asserted in accordance with the provisions of this Agreement
prior to the relevant expiration date shall survive until it is resolved.
ARTICLE X
TERMINATION
10.1 TERMINATION
This Agreement may be terminated and the transactions contemplated hereby
may be abandoned at any time prior to the Closing Date, before or after the
approval by the Founders:
(a) by mutual written consent duly authorized by the Boards of Directors of
Nextel and WVB; or
(b) by either Nextel or WVB if the transactions contemplated hereby shall
not have been consummated by the date 30 days after the date hereof; provided,
however, that if, despite the parties' reasonable best efforts, the applicable
waiting period under the HSR Act shall not have been terminated as of such date,
or the S-4 Registration Statement shall not have been declared and remain
effective as of such date, such date shall be extended for a reasonable period
not to exceed an additional 45 days to permit such condition or conditions to be
fulfilled; provided, further, that the right to terminate this Agreement under
this Section 10.1(b) shall not be available to any party whose failure to
fulfill any obligation under this Agreement has been the cause of or resulted in
the failure of the transactions contemplated hereby to occur on or before such
date; or
(c) by either Nextel or WVB if a court of competent jurisdiction or
governmental authority shall have issued a nonappealable final order, decree or
ruling or taken any other action, in each case having the effect of permanently
restraining, enjoining or otherwise prohibiting the transactions contemplated
hereby; or
(d) by Nextel or WVB if, pursuant to WVB's requests for shareholder
approval, the requisite vote of the Founders shall not have been obtained prior
to the date set forth in Section 10.1(b); or
(e) by Nextel if (i) the Board of Directors of WVB shall withdraw, modify
or change its recommendation in favor of this Agreement and the transactions
contemplated hereby in a manner adverse to Nextel or shall have resolved to do
any of the foregoing; (ii) the Board of Directors of WVB shall have recommended
to the Founders an alternative transaction; or (iii) a tender offer or exchange
offer for 15% or more of the outstanding shares of WVB Common Stock is commenced
(other than by Nextel or an Affiliate of Nextel) and the Board of Directors of
WVB recommends that the Founders tender their shares in such tender offer or
exchange offer; or
(f) by Nextel upon a breach of any representation, warranty, covenant or
agreement on the part of WVB set forth in this Agreement such that the
conditions set forth in Section 6.1 or 6.2 would not be satisfied; or by WVB
upon a breach of any representation, warranty, covenant or agreement on the part
of Nextel or Indimich set forth in this Agreement such that the conditions set
forth in Section 7.1 or 7.2 would not be satisfied; or
(g) by Nextel if any representation or warranty of WVB shall have become
untrue such that the conditions set forth in Article VI cannot reasonably be
expected to be satisfied by the date set forth in Section 10.1(b); or by WVB if
any representation or warranty of Nextel or Indimich shall have become untrue
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such that the conditions set forth in Article VII cannot reasonably be expected
to be satisfied by the date set forth in Section 10.1(b); or
(h) by Nextel or WVB if the Board of Directors of WVB shall have resolved
to accept a Superior Proposal.
10.2 EFFECT OF TERMINATION
In the event of any termination pursuant to this Article X (other than
pursuant to Section 10.1(a)), written notice setting forth the reasons therefor
shall forthwith be given by the terminating party to the other party hereto and
neither party shall have any liability to the other party of any nature
whatsoever due to such termination, except for damages resulting from a willful
breach by the other party.
ARTICLE XI
GENERAL
11.1 EXPENSES
If the transactions contemplated by this Agreement are consummated, Nextel
shall pay its own fees, costs and expenses, and the Founders shall pay their own
fees, costs and expenses, incident to the negotiation, preparation and carrying
out of this Agreement; provided, however, that WVB shall not bear any fees,
costs or expenses relating to the Merger for the benefit of any of the Founders,
Nextel or Indimich.
11.2 AMENDMENT
Prior to the Closing, Nextel, Indimich and WVB (and after the Closing,
Nextel, the Surviving Corporation and the Indemnifying Founders), may amend,
modify or supplement this Agreement at any time, but only in a written amendment
duly executed on behalf of each of the parties.
11.3 HEADINGS
The headings preceding the text of Sections of this Agreement are for
convenience only and shall not be deemed parts thereof.
11.4 APPLICABLE LAW
This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of Delaware, as applied to contracts
executed and to be fully performed in such state. Each of the parties hereto,
and each of the Founders by his, her or its approval of this Agreement, (a)
consents to submit itself to the personal jurisdiction of any federal court
located in the state of Virginia or any Virginia state court if any dispute
arises out of this Agreement or any of the transactions contemplated by this
Agreement, (b) agrees that it will not attempt to deny or defeat such personal
jurisdiction by motion or other request for leave from any such court, and (c)
agrees that it will not bring any action relating to this Agreement or any of
the transactions contemplated by this Agreement in any court other than a
federal court sitting in the state of Virginia or a Virginia state court.
11.5 PARTIES IN INTEREST
All of the terms and provisions of this Agreement shall be binding upon and
inure to the benefit of and be enforceable by the respective successors and
permitted assigns of the parties hereto, whether herein so expressed or not.
This Agreement shall not be assigned by either party hereto in whole or in part
without the prior written consent of the other party hereto; provided, however,
that Indimich may at any time assign all or part of its right, title and
interest in, to and under this Agreement and the documents, agreements and
supporting papers delivered in connection herewith to any Affiliate of Indimich
that is a wholly owned direct subsidiary of Nextel and that agrees in writing to
be bound by the provisions hereof and which has no assets, liabilities or
operations and which is in all respects in full compliance with all
representations, warranties,
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covenants and agreements contained herein. The representations, warranties,
covenants and agreements of Nextel and Indimich set forth in this Agreement are
made for the benefit of the Founders and, subject to the approval of this
Agreement and the Merger by the Founders, may be enforced by and against the
Founders in accordance with the terms of this Agreement.
11.6 WAIVERS
Any terms, covenants, representations, warranties or agreements of any
party hereto may be waived at any time by an instrument in writing executed by
the party for whose benefit such terms exist. The failure of any party at any
time or times to require performance of any provisions hereof shall in no manner
affect its right at a later time to enforce the same. No waiver by any party of
any condition or breach of any terms, covenants, representations, warranties or
agreements contained in this Agreement shall be effective unless in writing, and
no waiver in any one or more instances shall be deemed to be a further or
continuing waiver of any other condition or any breach of any other terms,
covenants, representations, warranties or agreements.
11.7 ACKNOWLEDGMENT
Each of Nextel and Indimich acknowledges that it has not relied on the
advice of WVB, the Founders or their respective counsel as to matters of
Brazilian law or regulation; provided, however, that this acknowledgment shall
in no way affect the rights of Nextel and Indimich under Article II, III or IX.
11.8 NOTICES
Any notice or demand desired or required to be given hereunder shall be in
writing and deemed given when personally delivered or deposited in the mail,
postage prepaid, sent certified or registered, or when delivered by facsimile,
and addressed as respectively set forth below, or to such other address as any
party shall have previously designated by such a notice. Any notice so delivered
personally or by facsimile, transmission confirmed, shall be deemed to be
received on the date of delivery and any notice so mailed shall be deemed to be
received three days after the date on which it was mailed.
Notices to the parties shall be sent as follows:
(a) To Nextel and Indimich:
Nextel Communications, Inc.
1505 Farm Credit Drive
McLean, VA 22102
Attention: Thomas Sidman, Esq.
Fax: (703) 394-3001
Dial Call Indimich, Inc.
c/o McCaw International, Ltd.
1191 Second Avenue, Suite 1600
Seattle, WA 98101
Attention: General Counsel
Fax: (206) 749-8384
with a copy to:
Perkins Coie
1201 Third Avenue, 40th Floor
Seattle, WA 98101-3099
Attention: Craig E. Sherman, Esq.
Fax: (206) 583-8500
File: 24570-11
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(b) To WVB:
Wireless Ventures of Brazil, Inc.
c/o Telcom Ventures, LLC
Arlington Courthouse Plaza II
2300 Clarendon Boulevard, Suite 800
Arlington, VA 22201
Attention: Dr. Rajendra Singh
Fax: (703) 243-4960
(with a copy to General Counsel)
and with a copy to:
Dewey Ballantine
1301 Avenue of The Americas
New York, NY 10019
Attention: William J. Phillips, Esq.
Fax: (212) 259-6333
11.9 COUNTERPARTS
This Agreement may be executed simultaneously in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
11.10 ENTIRE UNDERSTANDING
The terms set forth in this Agreement and the Confidentiality Agreement are
intended by the parties as a final, complete and exclusive expression of the
terms of their agreement and may not be contradicted, explained or supplemented
by evidence of any prior agreement, any contemporaneous oral agreement or any
consistent additional terms.
IN WITNESS WHEREOF, the parties hereto have entered into and signed this
Agreement as of the date and year first above written.
NEXTEL COMMUNICATIONS, INC.
By THOMAS J. SIDMAN
--------------------------------------
Its Vice President and General Counsel
----------------------------------
DIAL CALL INDIMICH, INC.
By THOMAS J. SIDMAN
--------------------------------------
Its Vice President and General Counsel
----------------------------------
WIRELESS VENTURES OF BRAZIL, INC.
By RAJENDRA SINGH
--------------------------------------
Its President
----------------------------------
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AMENDMENT NO. 1 TO AGREEMENT AND PLAN OF MERGER
AMENDMENT NO. 1 dated as of December 19, 1996, to AGREEMENT AND PLAN OF
MERGER by and among NEXTEL COMMUNICATIONS, INC., a Delaware corporation
("Nextel"), DIAL CALL INDIMICH, INC., a Delaware corporation and direct
wholly-owned subsidiary of Nextel ("Indimich"), and WIRELESS VENTURES OF BRAZIL,
INC., a Virginia corporation ("WVB"), dated as of October 28, 1996 (the
"Agreement").
RECITALS
A. Nextel, Indimich and WVB are parties to the Agreement.
B. Nextel, Indimich and WVB desire to amend certain provisions of the
Agreement pursuant to Section 11.2 of the Agreement.
In consideration of the mutual promises contained herein, the parties
hereto agree as follows:
ARTICLE I.
AMENDMENTS
1.1 DEFINED TERMS
Except where otherwise provided, terms defined in the Agreement are used
herein as therein defined.
1.2 AMENDMENTS
(a) Section 2.2.1(b) of the Agreement is hereby amended and restated to
read in its entirety as follows:
(b) The shares of common stock of Indimich issued and outstanding at the
Effective Time shall be converted into the number of shares of Class A
Common Stock of the Surviving Corporation which equals 81% of the total
number of shares of WVB Common Stock outstanding immediately following
the Effective Time.
(b) Section 10.1(b) of the Agreement is hereby amended and restated to read
in its entirety as follows:
(b) by either Nextel or WVB if the transactions contemplated hereby
shall not have been consummated by January 29, 1997; provided, however,
that the right to terminate this Agreement under this Section 10.1(b)
shall not be available to any party whose failure to fulfill any
obligation under this Agreement has been the cause of or resulted in the
failure of the transactions contemplated hereby to occur on or before
such date; or
(c) The Agreement is amended to add the following Section 5.18:
5.18 WVB Optionholder Waivers
Prior to the Closing Date, WVB agrees to use its best efforts: (i) to
obtain from each of the WVB Optionholders either (a) a waiver,
substantially in the form attached hereto as Exhibit 5.18, or (b) a
written agreement (in a form reasonably satisfactory to Nextel) (x)
regarding the exercise price and number of shares of WVB Class A Common
Stock and WVB Class B Common Stock issuable in respect of the WVB Option
held by such WVB Optionholder as a result of the Recapitalization of
WVB; or (y) cancelling the WVB Option without liability or cost to WVB.
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(d) The Agreement is amended to add the following Section 5.19:
5.19 Transfer of Shares to McCaw International, Ltd.
Immediately following completion of the Merger, Nextel, subject to the
proviso to Section 4.9(f), shall transfer to McCaw International, Ltd.,
a Washington corporation and an indirect wholly-owned subsidiary of
Nextel, all shares of Class A Common Stock of the Surviving Corporation
into which the shares of common stock of Indimich have been converted in
the Merger.
(e) The Agreement is amended to add the following Section 5.20:
5.20 STRYPES Transaction:
(a) Subject to the provisions set forth in clause (b) below (and to
Nextel's receipt of a written agreement, in form reasonably acceptable
to Nextel, signed by each of the Participants (as defined in clause (b)
below) and implementing the arrangements outlined in clause (b) below),
at the request of Telcom, Nextel shall provide reasonable assistance to
the WVB Shareholders (including, if and to the extent required by the
SEC, the preparation and filing of a registration statement (containing
a resale prospectus) covering the resale of the shares of Nextel Common
Stock issued to such WVB Shareholders in the Merger) in connection with
the proposed public offering, by or for the benefit of such WVB
Shareholders, to investors of securities to be issued by a trust in a
"STRYPES" or similar trust-type transaction (the "Trust Offering"). Such
assistance shall include the execution and delivery by Nextel of an
appropriate agreement with the WVB Shareholders and the underwriters of
such Trust Offering, which shall contain representations and warranties
by Nextel and the other parties to such agreement reasonably appropriate
in view of the role of such parties in such Trust Offering and otherwise
customary for secondary offerings of such type involving selling
shareholders who are not affiliates of Nextel and pursuant to which
Nextel shall arrange for the provision of an appropriate opinion of
counsel and accountants' comfort letters in standard form, provided that
the indemnification obligations of Nextel and the WVB Shareholders to
the underwriters pursuant to such agreement shall reflect the
arrangements agreed to and summarized in clause (b)(i) below. In
addition, Nextel shall afford the WVB shareholders, the underwriters of
such Trust Offering and their respective legal representatives access to
such information concerning Nextel, and to appropriate Nextel personnel,
as Nextel, such WVB Shareholders and such underwriters shall reasonably
determine to be advisable in the circumstances or as may be legally
required to enable such parties to fulfill their obligations under the
federal securities laws in connection with such Trust Offering, and
Nextel also shall cause at least one senior executive of Nextel to
participate in the "road show" for such Trust Offering.
(b) In consideration of the actions and commitments by Nextel set forth
above, Telcom and the other WVB Shareholders participating in such Trust
Offering (the "Participants") shall : (i) jointly and severally
indemnify Nextel in full against any and all losses, costs and
liabilities incurred by Nextel, its officers, directors, attorneys,
agents or controlled affiliates or any of them (the "Indemnified Group")
that arises from or is connected with any claim, action or proceeding
brought against or involving any member of the Indemnified Group by any
purchaser or underwriter (or any person claiming or asserting a claim by
or through any such purchaser or underwriter) of such Trust Offering;
provided that the Participants shall not be obligated hereby to
indemnify any member of the Indemnified Group against any losses, costs
or liabilities to the extent the same are determined by an Adjudication
(as defined in clause (c) below) to arise from one or more materially
false or misleading statements or omissions contained (or incorporated
by reference) in the resale prospectus or the related registration
statement prepared and filed by Nextel, in the form declared effective
(other than any of such information as was supplied (or was legally
required to be supplied) by any of such WVB Shareholders or the
underwriters for inclusion in such prospectus or registration
statement), or included in other written materials prepared by Nextel or
at Nextel's direction and were specifically authorized in writing by
Nextel to be employed as part of the offering materials related to the
Trust Offering (it being specifically understood and agreed that the
indemnification obligations of the Participants hereunder, and the
amount of any related payments due by them to
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any and all members of the Indemnified Group, shall be determined as
provided in clause (c) below) (any such claim, action or proceeding for
which such indemnification may be sought, after giving effect to the
exclusions set forth in the foregoing proviso, being referred to as an
"Indemnifiable Action"); (ii) pay to Nextel the amount of any payment
Nextel in turn would be required to make to the carriers providing its
Directors and Officers' insurance coverage to reinstate a dollar amount
of insurance coverage, up to the maximum amount of coverage initially in
force under the applicable policies during the current coverage period,
to the extent such coverage is reduced by any payments made to or claims
filed by or for the benefit of any member of the Indemnified Group in
respect of an Indemnifiable Action; (iii) pay Nextel for all excess
premium amounts that Nextel in turn would be required to pay to secure
an extension of its Directors and Officers' insurance coverage and
related policies of insurance at the expiration of the current coverage
period (with such extension coverage being in all material respects,
including term, deductibles, co-pays and allocations, limits and
exclusions, substantially identical to the coverage currently in force)
as a result of any payments made to or claims filed by or for the
benefit of any member of the Indemnified Group in respect of an
Indemnifiable Action (with the amount of such excess premiums being
agreed to be the difference between the total amount of the premiums
quoted as due to the relevant carriers for the extension coverage and
the total amount of the premiums for which such carriers would issue
identical replacement coverage if they were allowed to fully exclude
coverage for (and receive full reimbursement for (including reasonable
interest charges on) all amounts previously expended by them in respect
of) all Indemnifiable Actions under any policy issued or to be issued by
them to Nextel); and (iv) pay Nextel in full (up to an aggregate limit
amount of $250,000) for the actual, documented out-of-pocket costs
incurred by Nextel in connection with its provision of assistance
relating to the Trust Offering as contemplated above, including the
reasonable fees and expenses of Nextel's outside counsel and accountants
and expenses incurred by officers and employees of Nextel (including
travel expenses associated with participation in the "road show" for the
Trust Offering); it being expressly understood and agreed that excluded
from such amounts shall be (A) any and all payments made in respect of
salaries, employee benefits, employment taxes or similar normal
personnel overhead charges associated with the time Nextel's employees
may devote to tasks related to the Trust Offering, which shall be the
sole and exclusive responsibility of Nextel, and (B) any and all
registration, blue sky and similar fees, all financial printers costs
and all underwriters' expenses, commissions, discounts and similar fees,
which shall be the sole and exclusive responsibility of the
Participants.
(c) In the event of an Indemnifiable Action, the procedures set forth in
Section 9.3 herein shall control, with the Participants being the
Indemnifying Party and the members of the Indemnified Group being the
Indemnitee; provided that the $500,000 deductible and the liability
limitation provisions of Section 9.1 shall not be applicable, and
payments made by any Participants in respect of an Indemnifiable Action
shall be made only in cash and shall be excluded from the calculations
of such participant's maximum liability limitation, if any, for purposes
of Section 9.1. Nextel will act reasonably and in good faith in seeking
to obtain the maximum benefits of any Directors and Officers' insurance
coverage that may be available in respect of an Indemnifiable Action,
and in negotiating with the relevant insurance carrier(s) regarding the
appropriate deductible and allocation arrangements that may apply to
such Indemnifiable Action for purposes of such insurance coverage, and
the Participants' indemnification obligations as to an Indemnifiable
Action under clause (b)(i) above shall take into account all payments
and reimbursements to Nextel pursuant to such insurance coverage.
Subject to Nextel's obligations to act reasonably and in good faith as
provided in the preceding sentence, the Participants shall not contest
the results achieved by Nextel in respect of Directors' and Officers'
insurance coverage, including the amount of any applicable deductible
and/or the allocation arrangements, applicable to such Indemnifiable
Action. The term "Adjudication" shall mean, as to an Indemnifiable
Action that is resolved, whether on jurisdictional grounds or on its
merits by a court of competent jurisdiction, a final, non-appealable
judgment and as to an Indemnifiable Action that is settled or otherwise
disposed of prior to such a final, non-appealable judgment, a final and
binding arbitration award or any other outcome mutually agreed to
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<PAGE> 136
by Telcom and Nextel. Subject to Section 9.3, the Indemnifying Party
shall control the defense of the Indemnifiable Action, provided that the
Indemnified Group may assume control of the Indemnifiable Action if (i)
the Indemnified Group shall have proposed a settlement of the
Indemnifiable Action that the Indemnifying Party opposes and the
Indemnifying Party shall not, upon request, demonstrate to the
reasonable satisfaction of the Indemnified Group (including, if
requested, the posting of a bond or other security) that the
Indemnifying Party has the financial resources to meet its indemnifying
obligations hereunder or (ii) the Indemnifying Group shall assume
responsibility for the Indemnifiable Action. If the Indemnifying Party
should dispute its indemnification obligations on the grounds that the
matter at issue does not constitute an Indemnifiable Action, then the
Indemnifying Party promptly shall submit the matter at issue to a
process of binding arbitration, to be conducted in accordance with the
rules of the American Arbitration Association applicable to commercial
disputes (with such arbitration to be held in Washington, D.C.) by three
arbitrators mutually acceptable to Nextel and Telcom, and such
arbitrators shall determine if such matter constitutes an Indemnifiable
Action and, if so, the amount of the payment required to be made by the
Indemnifying Party to the Indemnity. The parties will use their
respective reasonable best efforts to assure that any such arbitration
is commenced and concluded as promptly as possible, shall bear their own
costs associated with the arbitration (including one half of the
arbitrators' fees and expenses allocated to each party), unless the
arbitrators' final award recommends a different treatment of such costs,
and agree that such arbitrators' award shall be final, binding and
non-appealable, and that judgment on such award may be had in any court
having jurisdiction of the relevant parties.
(f) The Agreement is amended to add the following Section 6.19:
6.19 WVB Optionholders
WVB shall have obtained from each WVB Optionholder either the waivers or
the agreements, as contemplated by Section 5.18, unless the Indemnifying
Founders shall have entered into an agreement in a form reasonably
satisfactory to Nextel agreeing to fully indemnify the Surviving
Corporation and Nextel for any damages and costs incurred by Nextel or
the Surviving Corporation with respect to any claims in respect of the
WVB Options.
(g) Section 9.4 of the Agreement is amended and restated to read in its
entirety as follows:
9.4 Survival
The covenants, agreements, representations and warranties made by the
parties in or pursuant to this Agreement shall survive the Closing for
18 months, except as otherwise set forth herein, and except that (a)
indemnification pursuant to Article IX relating to the representations
and warranties contained in Section 3.11 and 4.9 and indemnification
pursuant to Section 5.20 shall survive until expiration of the statute
of limitations applicable to the matters covered thereby (giving effect
to any waiver, mitigation or extension thereof), if later, and (b) the
agreements contained in this Article IX shall survive indefinitely. Any
claim for indemnification asserted in accordance with the provisions of
this Agreement prior to the relevant expiration date shall survive until
it is resolved.
ARTICLE II.
GENERAL
2.1 HEADINGS
The headings preceding the text of Sections of this Amendment are for
convenience only and shall not be deemed parts thereof.
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2.2 BINDING EFFECT; APPLICABLE LAW
This Amendment shall become effective when it shall have been executed by
Nextel, Indimich and WVB. This Amendment shall be governed by and construed and
enforced in accordance with the laws of the State of Delaware, as applied to
contracts executed and to be fully performed in such state.
2.3 COUNTERPARTS
This Amendment may be executed simultaneously in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have entered into and signed this
Amendment as of the date and year first above written.
NEXTEL COMMUNICATIONS, INC.
By THOMAS J. SIDMAN
-------------------------------------------
Its Vice President and General Counsel
----------------------------------------
DIAL CALL INDIMICH, INC.
By THOMAS J. SIDMAN
-------------------------------------------
Its Vice President and General Counsel
----------------------------------------
WIRELESS VENTURES OF BRAZIL, INC.
By HAL B. PERKINS
-------------------------------------------
Its Assistant Secretary and General Counsel
----------------------------------------
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<PAGE> 138
ANNEX B
ARTICLES OF AMENDMENT TO THE
ARTICLES OF INCORPORATION
OF
WIRELESS VENTURES OF BRAZIL, INC.
FIRST. The name of the corporation is WIRELESS VENTURES OF BRAZIL, INC.
(the "Corporation").
SECOND. Article SECOND of the Articles of Incorporation of the Corporation
is hereby amended to read in its entirety as follows:
"SECOND. The Corporation shall have two classes of common stock,
Class A Common Stock, par value one cent ($0.01) per share ("Class A Common
Stock"), and Class B Common Stock, par value one cent ($0.01) per share
("Class B Common Stock"). The total number of shares which the Corporation
shall have the authority to issue is 45,000,000 shares of Class A Common
Stock and 5,000,000 shares of Class B Common Stock.
A. Voting Rights. On all matters other than the election of
Directors, and except as required by law, the shares of Class A Common
Stock and Class B Common Stock shall vote together as a single class, with
each share of Class A Common Stock having 90/81st votes per share and each
share of Class B Common Stock having 10/19th votes per share.
B. Board of Directors. The holders of the outstanding shares of Class
A Common Stock ("Class A Holders") shall have the right, as a class, to
elect nine Directors. The holders of the outstanding shares of Class B
Common Stock ("Class B Holders") shall have the right, as a class, to elect
one Director.
C. Redemption Right of Class B Common Stock. Class B Holders shall be
entitled to cause the Corporation to redeem all outstanding shares of Class
B Common Stock on the terms set forth below.
(i) At any time after October 31, 2001 and prior to November 1, 2003,
or at any time after a Change of Control shall have occurred, the holder or
holders of a majority of the then outstanding shares of Class B Common
Stock may deliver a request for redemption to the Corporation, and upon
receipt of such a request the Corporation shall be required to redeem all
outstanding shares of Class B Common Stock on the terms specified below.
(ii) The Corporation shall schedule a closing (the "Closing") for such
redemption on a date selected by the Corporation within six months of
delivery of such notice, subject only to receipt of all required
governmental or regulatory approvals, and shall promptly notify all Class B
Holders of the time, date and place of the Closing.
(iii) At the Closing, the Corporation shall redeem all outstanding
shares of Class B Common Stock for a price (the "Redemption Price') equal
to the Appraised Fair Marker Value of the Corporation as of the exercise
date, multiplied by a fraction, the numerator of which is the number of
shares of Class B Common Stock outstanding and the denominator of which is
the number of shares of Common Stock (calculated on a fully-diluted basis
at the stated exercise price of all options) then outstanding. The
Redemption Price shall, at the Corporation's election, be payable in cash,
publicly-traded common stock of any entity owning not less than 50% of the
outstanding shares of Class A Common Stock ("Public Company Common Stock")
or any combination thereof. Any Public Company Common Stock transferred as
part of the Redemption Price shall be shares that are registered with the
Securities and Exchange Commission or that are required to be so registered
within 30 days after the Closing. The Public Company Common Stock shall be
valued at the average of the closing prices on the principal market on
which such stock is traded during the 20 trading days prior to the Closing.
If paid in cash, the Redemption Price shall be payable in four equal
quarterly installments, beginning on the date of closing of the repurchase
right and on each three-month anniversary thereof, with interest accruing
on the unpaid principal at the Prime Rate plus 1%.
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<PAGE> 139
For purposes of these Articles of Incorporation, a "Change of Control"
means the acquisition by any person, entity or group after January 13, 1997
of the power, directly or indirectly, to elect a majority of the
Corporation's Directors.
For purposes of these Articles of Incorporation, "Fair Market Value'
means the price that an unrelated third party would pay if it were to
acquire all outstanding equity interests of the Corporation (including all
outstanding vested options) in an arm's-length transaction, assuming that
such interests were being sold in a manner designed to attract all possible
participants and without taking into consideration a control premium or
minority discount. The "Appraised Fair Market Value" shall be determined in
accordance with the following procedures: the Corporation shall select an
investment banking firm of recognized national standing which has not
provided services to the Corporation or any affiliate of the Corporation
(an "Independent Appraiser") within the preceding 24 months (the "First
Appraiser") which shall appraise the Fair Market Value and deliver its
appraisal to the Corporation and the Class B Holders within 60 days of its
engagement. If the majority of the Class B Holders shall disagree with the
Fair Market Value determined by such Independent Appraiser then the
majority of Class B Holders shall have the right to appoint an additional
Independent appraiser (the "Second Appraiser"). If the Class B Holders do
not engage a Second Appraiser within 30 days of the First Appraiser's
delivery of its appraisal, the First Appraiser's appraisal shall be the
Appraised Fair Market Value. If the Class B Holders engage a Second
Appraiser, the Second Appraiser will appraise the Fair Market Value, and
deliver its appraisal to the Corporation and the Class B Holders within 60
days of its engagement. If such difference between the two appraisals is
less than 20% of the lower appraised value, the two appraisers shall engage
a third Independent Appraiser (the "Third Appraiser"), which shall appraise
the Fair Market Value with 60 days of its engagement. The Appraised Fair
Market Value shall be the average of the two appraised values which are
closest in absolute dollars. All appraisals of Fair Market Value shall be
as of the date of receipt by the Corporation of the request for redemption
right. The expenses of the First Appraiser shall be borne by the
Corporation; the expenses of the Second Appraiser, if any, shall be borne
by the Class B Holders, and the expenses of a Third Appraiser, if any,
shall be borne equally by the Corporation on the one had and the Class B
Holders on the other hand.
For purposes of these Articles of Incorporation, "Prime Rate" means
the rate announced by The Chase Manhattan Bank, N.A., or any successor
thereto, in New York City from time to time as its "base" or "prime" rate.
D. No Preemptive Rights. The Class A Holders and the Class B Holders
shall have no preemptive right to purchase or subscribe for any shares of
capital stock of the Corporation of any class whether now or hereafter
authorized or any securities convertible into an exchangeable for shares of
Common Stock.
E. Other Rights. Except as otherwise stated herein, the rights of
shares of Class A Common Stock and Class B Common Stock shall be equal in
all respects."
THIRD. Upon the effectiveness of these Articles of Amendment, each
outstanding share of the Corporation's Common Stock shall be automatically
converted into 81 shares of Class A Common Stock and 19 shares of Class B Common
Stock without any action on the part of any holder.
FOURTH. Pursuant to Sections 13.1-707 and 13.1-710 of the Virginia Stock
Corporation Act, the foregoing Articles of Amendment to the Articles of
Incorporation were adopted on ____________ , 1996 by the shareholders of the
Corporation.
The undersigned, being the President and a Director of the Corporation,
hereby declares that the facts herein stated are true as of this, the ____ day
of ____________ , 1996.
WIRELESS VENTURES OF BRAZIL, INC.
--------------------------------------
Rajendra Singh
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<PAGE> 140
President and Director
COMMONWEALTH OF VIRGINIA )
) ss.
COUNTY OF ARLINGTON )
I, , a Notary Public in and for the Commonwealth of Virginia,
do hereby certify that Rajendra Singh, whom I know personally, appeared before
me on this, the _______ day of _________________ , 1996 and executed the
foregoing Articles of Amendment.
Given under my hand and seal on this, the _______ day of
_________________ , 1996.
[NOTARIAL SEAL] --------------------------------------
Notary Public
My commission expires:
---------------
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<PAGE> 141
ANNEX C
ARTICLES OF AMENDMENT TO THE
ARTICLES OF INCORPORATION
OF WIRELESS VENTURES OF BRAZIL, INC.
FIRST: The name of the Corporation is WIRELESS VENTURES OF BRAZIL, INC.
(the "Corporation").
SECOND: Article FIRST of the Articles of Incorporation is amended to read
as follows:
"FIRST: The name of the Corporation is McCaw International
(Brazil), Ltd."
THIRD: Article THIRD of the Articles of Incorporation of the Corporation is
amended to read as follows:
The address of the registered office of the Corporation in the State of
Virginia is __________ ,and the name of its registered agent at such address
is__________________________________ .
FOURTH: A new ARTICLE SIXTH is added to the Articles of Incorporation of
the Corporation, to read as follows:
"SIXTH: No officer or Director shall be personally liable to the
Corporation or its shareholders in any proceedings brought by a
shareholder in the right of the Corporation or brought by or on behalf
of shareholders of the Corporation, for monetary damages assessed
against an officer or Director arising out of a single transaction,
occurrence or course of conduct. Notwithstanding the foregoing sentence,
an officer or Director shall be liable to the extent provided by
applicable law for (i) willful misconduct, (ii) a knowing violation of
criminal law, (iii) a knowing violation of federal or state securities
law, including, without limitation, insider trading or manipulation of
the market for any security, or (iv) any transaction from which the
officer or Director derived an improper personal benefit. Neither the
subsequent amendment or repeal of this Article SIXTH shall apply to or
have any effect on the liability of any officer or Director of the
Corporation for or with respect to any acts or omissions of such officer
or Director occurring prior to the date of any amendment or repeal of
this Article SIXTH.
FIFTH: A new Article SEVENTH is added to the Articles of Incorporation of
the Corporation, to read as follows:
"SEVENTH: The following actions shall require the affirmative vote
of two-thirds of the number of Directors in office, including the
Director elected by the Class B holders:
(a) The amendment the Articles of Incorporation or Bylaws of the
Corporation other than in the ordinary course of business.
(b) The creation of any equity security senior to the existing
Common Stock or the amendment of any provision or rights of the existing
classes of capital stock.
(c) Permitting or causing the Corporation or any of its material
subsidiaries to issue voting securities that have voting rights
different from those to which then-issued voting securities are
entitled.
(d) The dissolution, liquidation or spin-off the Corporation or any
material WVB Affiliates (as defined in the Agreement and Plan of Merger
relating to the Corporation dated as of October 28, 1996 (the "Merger
Agreement")) or any portion thereof, or merging or effecting any
acquisition involving the Corporation or any material WVB Affiliates, or
selling all or substantially all of the Corporation's (or any material
WVB Affiliate's) assets, except (i) as provided in the Merger Agreement
or (ii) in transactions involving only the Corporation and Affiliates of
the Corporation.
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(e) Permitting or causing the Corporation or any of its
subsidiaries (or any other Person to the extent the Corporation directly
or indirectly controls such Person) to enter into any material contract,
agreement or undertaking with McCaw International, Ltd. or any of its
Affiliates (other than the Corporation or its subsidiaries) other than
on an arm's-length, fair-market-value basis.
(f) Permitting or causing the Corporation or any Affiliate to
issue, allot or dispose of securities or rights to receive securities of
the Company, including options (but excluding employee options), other
than for cash at fair market value.
For purposes of these Articles of Incorporation, "Affiliate" of any Person
(the "Subject") shall mean any other Person that, directly or indirectly,
Controls or is Controlled by or is under common Control with the Subject.
For purposes of these Articles of Incorporation, "Control" (including, with
correlative meanings, the terms "Controlled by" and "under common Control
with"), as used with respect to any Person, means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of such Person, whether through the ownership of voting securities or
by contract or otherwise.
For purposes of these Articles of Incorporation, "Person" shall mean any
individual, partnership, joint-stock company, limited liability company, firm,
corporation, association, unincorporated organization, joint venture, trust or
other entity.
SIXTH: Pursuant to Sections 13.1-707 and 13.1-710 of the Virginia Stock
Corporation Act, the foregoing amendments to the Articles of Amendment were
adopted on , 19 , by the unanimous written consent of
the shareholders of the Corporation.
The undersigned, being the President and a Director of the Corporation,
hereby declares that the facts herein stated are true as of this, the day of
, 199 .
WIRELESS VENTURES OF BRAZIL, INC.
----------------------------------
Rajendra Singh
President and Director
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ANNEX D
BYLAWS
OF
WIRELESS VENTURES OF BRAZIL, INC.
ARTICLE I
OFFICES
The Corporation shall have offices at such places both within and outside
the Commonwealth or Virginia as the Board of Directors may from time to time
determine or as the business of the Corporation may require.
ARTICLE II
MEETINGS OF SHAREHOLDERS
SECTION 2.1 LOCATION
All meetings of shareholders shall be held at such places either within or
outside the Commonwealth of Virginia as shall be designated from time to time by
the Board of Directors and stated in the notice of the meeting or in a duly
executed waiver of notice thereof.
SECTION 2.2. ANNUAL MEETINGS
Annual meetings of shareholders shall be held, in each year, commencing
with the year 1994, on the first business day in the month of May, at 10:00 A.M.
or at such other date and time as shall be designated from time to time by the
Board of Directors and stated in the notice of the meeting. At each annual
meeting, the shareholders shall elect a Board of Directors and shall transact
such other business as may properly brought before the meeting.
SECTION 2.3 SPECIAL MEETINGS
Unless otherwise prescribed by law, the Articles of Incorporation or these
Bylaws, special meetings of the shareholders for any purpose or purposes shall
be called by the Chairman of the Board, if any, or by the Secretary of the
Corporation at the written request of the Chairman, the President, or the Board
of Directors, or if the Corporation has thirty-five or fewer shareholders of
record, upon written demand to the Secretary signed by the holders of at least
twenty percent of the shares entitled to vote on the issue(s) proposed to be
considered. Requests for special meetings shall state the purpose or purposes of
the proposed meeting and shall be signed, dated and delivered to the Secretary
of the Corporation. Business transacted at any special meeting of shareholders
shall be limited to the purposes stated in the notice.
SECTION 2.4 NOTICES OF ANNUAL AND SPECIAL MEETINGS
(a) Except as otherwise provided by law, the Articles of Incorporation or
these Bylaws, written notice of any annual or special meeting of the
shareholders shall state the place, date and time of the meeting and, in the
case of a special meeting, the purpose or purposes for which the meeting is
called. Notice of a meeting shall be given, either personally or by mail, to
each shareholder entitled to vote at such meeting, not less than ten (10) nor
more than sixty (60) days before the date of the meeting subject to the
provisions of subsection (b) below.
(b) Notice of a shareholders' meeting (whether annual or special) to act
upon an amendment of the Articles of Incorporation, a reduction of stated
capital, or a plan of merger, consolidation or share exchange,
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a proposed sale of assets other than in the regular course of business or the
dissolution of the Corporation shall be given to each shareholder of record
entitled to vote at such meeting not less than twenty-five (25) nor more than
sixty (60) days before the date of such meeting.
(c) If mailed, notice of any annual or special meeting of shareholders
shall be deemed to have been given when deposited in the United States mail,
postage prepaid, directed to the shareholder at his address as it appears on the
records of the Corporation.
SECTION 2.5 LIST OF SHAREHOLDERS
At least ten (10) days (but not more than sixty (60) days) before any
meeting of the shareholders, the officer or agent in charge of the stock
transfer books of the Corporation shall prepare a complete alphabetical list of
the shareholders entitled to vote at such meeting, which list shows the address
of each shareholder and the number of shares registered in the name of each
shareholder. For a period of at least ten (10) days prior to the meeting, the
list so prepared shall be maintained at the registered office of the Corporation
or at is principal office or at the office of its transfer agent or registrar
and, if the meeting is to be hold in a city different from the location of the
foregoing, at a place in the city where the meeting is to be held, and shall be
subject to inspection by any shareholder for any purpose germane to the meeting
at any time during usual business hours. The list shall also be produced and
kept open at the meeting (during the entire duration thereof) and except as
otherwise provided by law, may be inspected by any shareholder or holder of the
proxy of a shareholder who is present in person at such meeting.
SECTION 2.6 PRESIDING OFFICERS
Meetings of the shareholders shall be presided over by the Chairman of the
Board, if any, or if the Chairman is not present, by the President, or if the
President is not present, by a Vice President, or if a Vice President is not
present, by such person who is chosen by the Board of Directors, or if no one,
by a chairperson to be chosen at the meeting by the shareholders. The Secretary
of the Corporation shall act as secretary of each meeting of shareholders, or if
the Secretary is not present, an Assistant Secretary, or if an Assistant
Secretary is not present, such person as may be chosen by the Board of
Directors, or if none, by a person selected by the chairperson at the meeting.
SECTION 2.7 ORDER OF BUSINESS
The following order of business, unless otherwise ordered at the meeting by
the chairperson thereof, shall be observed as far as practicable and consistent
with the purpose of the meeting.
a. Call to order.
b. Presentation of proof of mailing of notice of the meeting and, if the
meeting is a special meeting, the call thereof.
c. Presentation of proxies.
d. Determination and announcement that a quorum is present.
e. Reading and approval (or waiver thereof) of the minutes of the previous
meeting.
f. Reports, if any, of officers.
g. Election of directors, if the meeting is an annual meeting or a meeting
called for that purpose.
h. Consideration of specific purpose(s) for which the meeting has been
called (other than election of directors).
i. Transaction of such other business as may properly come before the
meeting.
j. Adjournment.
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SECTION 2.8 QUORUM; ADJOURNMENTS
a. The holders of at least a majority of the shares of the capital stock of
the Corporation issued and outstanding and entitled to a vote at any given
meeting, present in person or by proxy, shall be necessary to and shall
constitute a quorum at all meetings of the shareholders, except as otherwise
provided by law, these Bylaws or the Articles of Incorporation.
b. If a quorum is not present in person or by proxy at any meeting of
shareholders, the shareholders entitled to vote thereat, present in person or by
proxy, shall have the power to adjourn the meeting from time to time, without
notice of the adjourned meeting if the time and place thereof are announced at
the meeting at which the adjournment it taken, until a quorum shall be present
in person or by proxy.
c. Even if a quorum is present in person or by proxy at any meeting of the
shareholders, the shareholders entitled to vote thereat present in person or by
proxy shall have the power to adjourn the meeting from time to time for good
cause, without notice of the adjourned meeting, if the time and place thereof
are announced at the meeting at which the adjournment is taken, until a date
which is not more than one hundred twenty (120) days after the date of the
original meeting.
d. Any business which might have been transacted at the original meeting
may be transacted at any meeting held after adjournment as provided in this
Section 2.8. Anything in subsection (b) of this Section 2.8 to the contrary
notwithstanding, if an adjournment is for more than one hundred twenty (120)
days, or if after an adjournment a new record date is fixed for the adjourned
meeting, notice of the adjourned meeting shall be given to each shareholder of
record entitled to vote thereat.
SECTION 2.9 VOTING
a. At any meeting of the shareholders, every shareholder having the right
to vote shall be entitled to vote in person or by proxy. Except as otherwise
provided by law or by the Articles of Incorporation, each shareholder or record
shall be entitled to one vote (on each matter submitted to a vote) for each
share of capital stock registered in his, her or its name on the books of the
Corporation.
b. All elections of directors and, except as otherwise provided by law or
in the Articles of Incorporation, all other matters, to include the merger into
another corporation, merger of a subsidiary, sale of assets other than in the
ordinary course of business, dissolution and other such major transactions,
shall be determined by a majority of the shares present in person or represented
by proxy and voting on such other matters.
c. No proxy shall be voted or acted upon after eleven (11) months from its
date, unless the proxy provides for a longer period.
SECTION 2.10 ACTION BY CONSENT
Any action required or permitted to be taken at any meeting of the
shareholders may be taken without a meeting, without prior notice and without a
vote if a written consent in lieu of such meeting, which consent sets forth the
action so taken and the date of execution by each shareholder, if signed before
or after such action by all of the shareholders entitled to vote with respect to
the subject matter thereof. All written consents shall be filed with the minutes
of the meetings of the shareholders. Prompt written notice of the taking of
corporate action without a meeting by unanimous consent must be given to all
shareholders not entitled to vote on the matter to which the shareholders give
their written consent if required by statute.
ARTICLE III
DIRECTORS
SECTION 3.1 GENERAL POWERS
The business and affairs of the Corporation shall be managed under the
direction of the Board of Directors, which may exercise all powers of the
Corporation and perform or authorize the performance of all
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lawful acts and things which are not by law, the Articles of Incorporation or
these Bylaws directed or required to be exercised or performed by the
shareholders.
SECTION 3.2 NUMBER AND TENURE
The number of directors, all of a single class, which shall constitute the
whole board shall be fixed by the Board of Directors but be at least one (1) and
not more than ten (10) five (5). The maximum number of directors may be altered
only by an amendment to this bylaw which has been approved by the holders of a
majority of the shares of the common stock of the corporation. The directors
shall be elected at the annual meeting of the shareholders (except as otherwise
provided in Section 3.3 of this Article), and each director shall hold office
until his or her successor is elected and qualified or until his or her earlier
resignation or removal. Directors need not be residents of the Commonwealth of
Virginia or shareholders of the Corporation.
SECTION 3.3 VACANCIES
Vacancies and newly created directorships resulting from any increases in
the authorized number of directors may be filled by the shareholders or by a
majority of the directors then in office, though less than a quorum, or by sole
remaining director, and the directors so chosen shall hold office until the next
annual election and until their successors are duly elected and shall qualify,
or until their earlier resignation or removal.
SECTION 3.4 REMOVAL; RESIGNATION
a. Except as otherwise provided by law, the Articles of Incorporation or
these Bylaws, at any meeting of the shareholders called expressly for such
purpose, any director may be removed, with or without cause, by a vote of the
shareholders holding a majority of the shares issued and outstanding and
entitled to vote at an election of the directors.
b. Any director may resign at any time upon written notice to the Board of
Directors, the Chairman of the Board, if any, the President or the Secretary of
the Corporation. Unless otherwise specified in such written notice, a
resignation shall take effect upon delivery thereof to the Board of Directors of
the designated officer. A resignation need not be accepted in order to be
effective.
SECTION 3.5 PLACE OF MEETINGS
The Board of Directors of the Corporation may hold both regular and special
meetings, either within or outside the Commonwealth of Virginia, at such place
as the Board from time to time deems advisable.
SECTION 3.6 ANNUAL MEETINGS
The first meeting of each newly elected Board of Directors shall be held as
soon as practicable (but in no event more than ten (10) days) following the
annual meeting of the shareholders, and no notice of such meeting shall be
necessary to the newly elected directors for such meeting to be lawful, provided
a quorum is present thereat.
SECTION 3.7 REGULAR MEETINGS
Additional regular meetings of the Board of Directors may be held without
notice at such time and place as may be determined from time to time by
resolution of the Board.
SECTION 3.8 SPECIAL MEETINGS
Special meetings of the Board of Directors may be called by the Chairman of
the Board, if any, or by the President or by any director on two (2) days'
notice to each director either personally or by telegram, facsimile, electronic
mail or other form of wire or wireless communication provided that the sender of
such notice can substantiate the content and means by which the notice is
delivered, or on five (5) days' notice if sent by mail.
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SECTION 3.9 QUORUM; ADJOURNMENTS
A majority of the number of directors then in office shall constitute a
quorum for the transaction of business at each and every meeting of the Board of
Directors, and except as otherwise provided by law, the Articles of
Incorporation or elsewhere in these Bylaws, the act of a majority of the
directors present at any meeting at which a quorum is present shall be the act
of the Board of Directors. If a quorum is not present at any meeting of the
Board of Directors, the directors present may adjourn the meeting, without
notice other than announcement at the meeting of the time and place of the
adjourned meeting, until a quorum is present.
SECTION 3.10 COMPENSATION
Directors shall be entitled to such compensation for their services as
directors as from time to time may be fixed by the shareholders and, in any
event, shall be entitled to reimbursement of all reasonable expenses incurred by
them in attending directors' meetings. Any director may waive such compensation.
No director who receives compensation as a director shall be barred from serving
the Corporation in any other capacity or from receiving compensation or
reimbursement of reasonable expenses for any or all of such other services.
SECTION 3.11 ACTION BY CONSENT
Any action required or permitted to be taken at any meeting of the Board of
Directors, or of any committee designated in accordance with Article IV of these
Bylaws, may be taken without a meeting and without prior notice, if a written
consent in lieu of such meeting which sets forth the action so taken is signed
by all of the directors either before or after such action has been taken. An
action taken hereunder is effective on the date of execution of the written
consent by the last director or on any alternate date specified in the consent
so long as the date on which each director gives such consent is specified. All
written consents shall be filed with the minutes of the Board's proceedings.
SECTION 3.12 MEETINGS BY TELEPHONE OR SIMILAR COMMUNICATIONS
The Board of Directors may participate in meetings by means of conference
telephone or similar communications equipment, whereby all directors
participating in the meeting can hear each other at the same time, and
participation in any such meeting shall constitute presence in person by such
director at such meeting. A written record shall be made of all actions taken at
any meeting conducted by means of a telephone conference or similar
communications arrangement.
ARTICLE IV
COMMITTEES
SECTION 4.1 EXECUTIVE COMMITTEE
a. By resolution adopted by a majority of the whole Board, the Board of
Directors may designate two or more directors to constitute an Executive
Committee. One of such directors shall be designated as Chairman of the
Executive Committee. Each member of the Executive Committee shall constitute as
a member thereof until the expiration of his term as a director or until his
earlier resignation from the Execution Committee, in either case unless sooner
removed as a member of the Executive Committee or as a director by any means
authorized by these Bylaws.
b. The Executive Committee shall have an may exercise all of the rights,
powers and authority of the Board of Directors except as expressly limited by
the Virginia Stock Corporation Act as amended from time to time.
c. The Executive Committee shall fix its own rules of procedure and shall
meet at such times and at such place or places as may be provided by its rules.
The Chairman of the Executive Committee, or in the absence of a Chairman, a
member of the Executive Committee chosen by a majority of the members present,
shall preside at meetings of the Executive Committee, and another member thereof
chosen by the Executive Committee shall act as its secretary. A majority of the
Executive Committee shall constitute a quorum for the
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transaction of business, and the affirmative vote of a majority of the members
thereof shall be required for any action of the Executive Committee. The
Executive Committee shall keep minutes of its meetings and shall deliver such
minutes to the Board of Directors for inclusion with the records of the meetings
of the Board of Directors.
SECTION 4.2 OTHER COMMITTEES
The Board of Directors, by resolution duly adopted by a majority of
directors at a meeting at which a quorum is present, may appoint such other
committee or committees as it shall deem advisable and with such limited
authority as the Board of Directors shall from time to time determine.
SECTION 4.3 OTHER PROVISIONS REGARDING COMMITTEES
a. The Board of Directors shall have the power at any time to fill
vacancies in, change the membership of, or discharge any committee.
b. Members of any committee shall be entitled to such compensation for
their services as may be fixed from time to time by the Board of Directors and,
in any event, shall be entitled to reimbursement of all reasonable expenses
incurred in attending committee meetings. Any member of a committee may waive
compensation for any meeting. No committee member who receives compensation as a
member of any one or more committees shall be barred from serving the
Corporation on any other capacity or from receiving compensation and
reimbursement of reasonable expenses for any or all such other services.
c. Unless prohibited by law, the provisions of Section 3.11 ("Action by
Consent") and Section 3.12 ("Meetings by Telephone or Similar Communications")
of Article III shall apply to all committees created by the Board of Directors
from time to time.
ARTICLE V
OFFICERS
SECTION 5.1 POSITIONS
The officers of the Corporation shall be chosen by the Board of Directors
and shall consist of a President, a Secretary and a Treasurer. Only the
President need be a director. The Board of Directors may choose a Chairman of
the Board, one or more Vice Presidents, Assistant Secretaries and/or Assistant
Treasurers and such other officers and/or agents as the Board from time to time
deems necessary or appropriate. The Board of Directors may delegate to the
President of the Corporation the authority to appoint any officer or agent of
the Corporation and to fill a vacancy other than the Chairman of the Board,
President, Secretary or Treasurer. The election or appointment of any officer of
the Corporation in itself shall not create contract rights for any such officer.
All officers of the Corporation shall exercise such powers and perform such
duties as from time to time shall be determined by the Board of Directors. Any
two or more offices may be held by the same person except the officers of
President and Secretary and of President and Vice President.
SECTION 5.2 TERM OF OFFICER; REMOVAL
Each officer of the Corporation shall hold office at the pleasure of the
Board of Directors, and any officer may be removed, with or without cause, at
any time by the affirmative vote of the majority of the directors then in
office; provided, however, that any officer appointed by the President pursuant
to authority delegated to the President by the Board of Directors may be
removed, without or without cause, at any time whenever the President, in his or
her absolute discretion shall consider that the best interests of the
Corporation will be served by such removal. Removal of an officer by the Board
of Directors or by the President shall not prejudice the contract rights, if
any, of the person so removed. Vacancies (however caused) in any office shall be
filled for the unexpired portion of the term by the Board of Directors (or by
the President in the case of a vacancy occurring in an office to which the
President has been delegated the authority to make appointments).
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SECTION 5.3 COMPENSATION
The salaries of all officers of the Corporation shall be fixed from time to
time by the Board of Directors, and no officer shall be prevented from receiving
a salary by reason of the fact that he also receives from the Corporation a
salary in any other capacity.
SECTION 5.4 CHAIRMAN OF THE BOARD
The Chairman of the Board (if the Board of Directors selects one) shall be
an officer of the Corporation and, subject to the direction of the Board of
Directors, shall perform such executive, supervisory and management functions
and duties as from time to time may be assigned by the Board. The Chairman of
the Board, if present, shall preside at all meetings of the shareholders and at
all meetings of the Board of Directors.
SECTION 5.5 PRESIDENT
The President shall be the chief executive officer of the Corporation and,
subject to the direction of the Board of Directors, shall have general charge of
the business affairs and property of the Corporation and general supervision
over its other officers and agents. In general, the President shall perform all
duties incident to the office of president of a stock corporation and shall see
that all orders and resolutions of the Board of Directors are carried into
effect. Unless otherwise prescribed by the Board of Directors, the President
shall have full power and authority on behalf of the Corporation to attend, act
and vote at any meeting of security holders of other corporations in which the
Corporation may hold securities. At any such meeting, the President shall
possess and may exercise any and all rights and powers incident to the ownership
of such securities which the Corporation possesses and has the power to
exercise. The Board of Directors from time to time may confer like powers upon
any other person or persons.
SECTION 5.6 VICE PRESIDENT(S)
In the absence of the President, the Vice President, if any (or in the
event more than one Vice President has been appointed, the Vice President in the
order designated by the Board of Directors or by the President or, in the
absence of any designation, in the order of their appointment), shall perform
the duties and exercise the powers of the President. In addition, the Vice
President(s) shall assist the President and shall perform such other duties and
have such other powers as from time to time may be prescribed by the Board of
Directors.
SECTION 5.7 SECRETARY
The Secretary shall attend all meetings of the Board of Directors and of
the shareholders and shall record all votes and all of the proceedings of all
meetings in a book to be kept for that purpose. The Secretary shall also perform
like duties for the Executive Committee, if any, and any other committees of the
Board of Directors, if required by such committee(s). The Secretary shall give
(or cause to be given) notice of all meetings of the shareholders and all
special meetings of the Board of Directors, and shall perform such other duties
as may be prescribed by the Board of Directors, the Chairman of the Board and
the President. The Secretary shall have custody of the seal of the Corporation,
shall have authority (as shall any Assistant Secretary) to affix the same to any
instrument requiring it, and to attest the seal by his or her signature. The
Board of Directors may given general authority to officers other than the
Secretary or any Assistant Secretary to affix the seal of the Corporation and to
attest the affixing thereof by his or her signature.
SECTION 5.8 TREASURER
The Treasurer shall have custody of corporate funds, securities, other
similar valuable effects and evidences of indebtedness, shall keep full and
accurate accounts of receipts and disbursements in books belonging to the
Corporation and shall deposit all moneys and other valuable effects in the name
and to the credit of the Corporation in such depositories as may be designated
from time to time by the Board of Directors. The Treasurer shall disburse the
funds of the Corporation in such manner as may be ordered from
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time to time by the Board of Directors and shall render to the Chairman of the
Board, if any, the President and the Board of Directors, at regular meetings of
the Board or whenever any of them may so require, an account of all of the
transactions of the Treasurer and of the financial condition of the Corporation.
SECTION 5.9 ASSISTANT TREASURER
The Assistant Treasurer, if any (or in the event that there is more than
one, the Assistant Treasurers in the order designated, or in the absence of any
designation, in the order appointed), in the absence of the Treasurer(s) shall
perform the duties and exercise the powers of the Treasurer. The Assistant
Treasurer(s) shall perform such other duties and shall have such other powers as
from time to time may be prescribed by the Board of Directors.
ARTICLE VI
NOTICES
SECTION 6.1 FORM; DELIVERY
Notice of any meeting of the Board of Directors may be given orally. Any
other notice required or permitted to be given to any officer, shareholder or
committee member shall be in writing and shall be hand-delivered or sent by
first class mail, postage prepaid, or by telegraph, teletype, electronic mail or
other form of wire or wireless communication provided that the sender retains
proof of the content and delivery of such notice. In every case, the notice
shall be addressed to the recipient at his or her address as it appears in the
records of the Corporation. Except as otherwise allowed by law, notice sent by
mail, postage prepaid, is effective when mailed. All other notices shall be
deemed to be given at the time they are delivered at the address of the named
recipient as it appears in the records of the Corporation.
SECTION 6.2 WAIVER; EFFECT OF ATTENDANCE
Whenever any notice is required to be given by law, the Articles of
Incorporation or these Bylaws, a written waiver thereof, signed by the person or
persons entitled to such notice, whether before or after the time stated
therein, shall be deemed equivalent of such notice when delivered to the
Secretary of the Corporation and filed with the minutes or the Corporation's
records. In addition, any shareholder who attends a meeting of the shareholders
in person, or who is represented at such meeting by proxy, or any director or
committee member who attends a meeting of the Board of Directors or a committee
thereof shall be deemed to have had timely and proper notice of the meeting,
unless such shareholder (or his or her proxy) or director or committee member
attends for the express purpose of objecting to the transaction of any business
on the grounds that the meeting is not lawfully called or convened.
ARTICLE VII
INDEMNIFICATION AND EXCULPATION; TRANSACTIONS WITH
AFFILIATED PERSONS; LIMITATION ON LIABILITY
SECTION 7.1 INDEMNIFICATION AND EXCULPATION
Reference is hereby made to Sections 13.1-696 to 13.1-704 of the Virginia
Stock Corporation Act (or any successor provision thereto). The Corporation
shall indemnify each person who may be indemnified (the "Indemnitees") pursuant
to such section to the full extent permitted thereby. In each and every
situation where the Corporation may do so under such section, the Corporation
hereby obligates itself to so indemnify the Indemnities, and in each case, if
any, where the Corporation must make certain investigations on a case-by-case
basis prior to indemnification, the Corporation hereby obligates itself to
pursue such investigations diligently, it being the specific intention of these
Bylaws to obligate the Corporation to indemnify each person whom it may
indemnify to the full extent permitted by law at any time and from time to time,
even if such
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Indemnitee is adjudged liable to the Corporation. Indemnification shall include,
but shall not be limited to, making advances and reimbursements for expenses to
Indemnitees, providing indemnification and obtaining court orders for
advancements, reimbursements and indemnification.
SECTION 7.2 COMMON OR INTERESTED OFFICERS AND DIRECTORS
Officers and directors shall exercise their powers and perform their duties
in good faith and with a view to the best interests of the Corporation. No
contract or other transaction between the Corporation and one or more of its
officers or directors, or between the Corporation and any firm, association, or
other corporation or entity in which one or more of the officers or directors of
the Corporation serves as an officer or director or is pecuniarily or otherwise
interested, shall be either void or voidable because of such common directorate,
officership or interest, because such officers or directors are present at the
meeting of the Board of Directors or any committee thereof which authorizes,
approves or ratifies the contract or transaction, or because his, her or their
votes are counted for any such purpose, if (unless otherwise prohibited by law)
any of the conditions specified in the following paragraphs exists:
a. the material facts of the common directorate, interest, contract or
transaction are disclosed to or known by the Board of Directors or committee
thereof, and the Board or committee authorizes or ratifies such contract or
transaction in good faith by the affirmative vote of a majority of the
interested directors, even though the number of such disinterested directors may
be less than a quorum; or
b. the material facts of the common directorate, interest, contract or
transaction are disclosed to or known by the shareholders entitled to a vote
thereon, and the contract or transaction is specifically approved in good faith
by a vote of the shareholders; or
c. the contract or transaction is fair to the Corporation.
A quorum is present at any meeting of the Board of Directors or committee
thereof which authorizes, approves or ratifies any contract or transaction when
a majority of the directors who have no direct or indirect personal interest in
the contrast or transaction votes in favor of such contract or transaction. No
contract or transaction may be authorized, approved or ratified under this
section by a single director.
SECTION 7.3 LIMITATION ON LIABILITY
No officer or director shall be personally liable to the Corporation or its
shareholders in any proceedings brought by a shareholder in the right of the
Corporation or brought by or on behalf of shareholders of the Corporation, for
monetary damages assessed against an officer or director arising out of a single
transaction, occurrence or course of conduct. Notwithstanding the foregoing
sentence, an officer or director shall be liable to the extent provided by
applicable law for (i) willful misconduct, (ii) a knowing violation of criminal
law, (iii) a knowing violation of federal or state securities law, including,
without limitation, insider trading or manipulation of the market for any
security, or (iv) any transaction from which the officer or director derived an
improper personal benefit. Neither the subsequent amendment or repeal of this
Section 7.3 shall apply to or have any effect on the liability of any officer or
director of the Corporation for or with respect to any acts or omissions of such
officer or director occurring prior to the date of any amendment or repeal of
this Section 7.3.
ARTICLE VIII
STOCK CERTIFICATES
SECTION 8.1 FORM; SIGNATURES
Each shareholder who has fully paid for any stock of the Corporation shall
be entitled to receive a certificate representing such shares, and such
certificate shall be signed by the Chairman of the Board, if any, or by the
President or a Vice President and by the Treasurer or an Assistant Treasurer or
the Secretary or an Assistant Secretary of the Corporation. Signatures on the
certificate may be by facsimile, in the manner prescribed by law. Each
certificate shall exhibit on its face the number and class (and series, if any)
of the shares it represents. Each certificate shall also state upon its face the
name of the person to whom it is issued
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and that the Corporation is organized under the laws of the Commonwealth of
Virginia. Each certificate may (but need not) be sealed with the seal of the
Corporation or facsimile thereof. In the event that any officer, transfer agent
or registrar who has signed, or whose facsimile signature has been placed upon,
a certificate shall have ceased to hold such position before the certificate is
issued, the Corporation may nevertheless issue the certificate with the same
effect as if such signatory continued to hold such position at the date of issue
of the certificate.
SECTION 8.2 REGISTRATION OF TRANSFER
Upon surrender to the Corporation or to a transfer agent of the Corporation
of a certificate for shares duly endorsed or accompanied by proper evidence of
succession, assignment or authority to transfer, the Corporation or its transfer
agent shall issue a new certificate to the person entitled thereto, cancel the
old certificate and record the transaction upon the corporation's books.
SECTION 8.3 REGISTERED SHAREHOLDERS
Except as otherwise provided by law, the Corporation shall be entitled to
recognize the exclusive right of a person who is registered on its books as the
owner of shares of its capital stock to receive dividends or other distributions
(to the extent otherwise distributable or distributed) to vote (in the case of
voting stock) as such owner, and to hold liable for calls and assessments a
person who is registered on its books as the owner of shares of its capital
stock. The Corporation shall not be bound to recognize any equitable or legal
claim to or interest in such shares on the part of any other person. The
Corporation (or its transfer agent) shall not be required to send notices or
dividends to any shareholders other than those identified by name and address on
the stock transfer ledger maintained by the Corporation (or by the transfer
agent or registrar, if any), unless such person shall have notified the
Corporation (or the transfer agent or registrar, if any), in writing, of a
change in his, her or its name or address at least ten (10) days prior to the
mailing of such notice or dividend.
SECTION 8.4 RECORD DATE
On order that the Corporation may determine the shareholders entitled (i)
to notice of or vote at any meeting of the shareholders or any adjournment
thereof, (ii) to express consent to corporate action in writing without a
meeting, (iii) to receive payment of any dividend or other distribution, (iv) to
allotment of conversion or exchange of stock, or (v) in order that the
Corporation may make a determination of the shareholders of record for any other
lawful purpose, the Board of Directors may fix, in advance, a date as the record
date for any such determination. Such date shall not be more than seventy (70)
days nor less than ten (10) days before the date of such meeting, nor more than
seventy (70) days prior to the date of any other action. A determination of
shareholders of record entitled to notice of or vote at a meeting of
shareholders shall apply to any adjournment of the meeting taken pursuant to
Section 2.8 of Article II; provided, however, that the Board of Directors, in
its discretion, may fix a new record date for the adjourned meeting, and shall
be required to fix a new record date if a meeting is adjourned to a date more
than one hundred twenty (120) days after the date fixed for the original
meeting.
SECTION 8.5 LOST, STOLEN OR DESTROYED CERTIFICATE
The Board of Directors may direct a new stock certificate to be issued in
place of any certificate theretofore issued by the Corporation which is claimed
to have been lost, stolen or destroyed, upon receipt of an affidavit of that
fact from the owner of the stock reciting the relevant facts of loss, theft or
destruction. When authorizing issuance of a replacement certificate, the Board
of Directors may, in its discretion and as a condition precedent to such
issuance, require that the owner of the lost, stolen or destroyed certificate,
or the owner's legal representative, advertise the same in such manner as the
Board shall direct, as indemnity against any claim that may be made against the
Corporation with respect to the certificate claimed to have been lost, stolen or
destroyed.
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SECTION 8.6 TRANSFER WITHOUT CERTIFICATES
In the event that the Board of Directors shall authorize the issuance or
transfer of some or all of the shares of any or all classes or series of the
stock of the Corporation without certificates, the Corporation shall, within a
reasonable time, after any such issuance or transfer, send to the shareholder a
written statement of the information required by statute to appear on stock
certificates. An authorization in accordance herewith shall have no effect upon
shares already represented by certificates until they are surrendered to the
Corporation.
ARTICLE IX
AMENDMENTS
SECTION 9.1 BY THE SHAREHOLDERS
New bylaws may be adopted or these Bylaws may be amended or repealed by the
vote of shareholders entitled to exercise a majority of the voting power of the
Corporation or by the written consent of such shareholders, except as otherwise
provided by statute.
SECTION 9.2 BY THE BOARD OF DIRECTORS
Subject to the right of shareholders as provided in Section 9.1 hereof to
adopt, amend or repeal these Bylaws, the Board of Directors may adopt, amend or
repeal any Bylaw other than a Bylaw or amendment thereof changing the maximum
authorized number of directors, provided that notice of any proposal to make,
alter or repeal a Bylaw is included in the notice of the meeting of the Board of
Directors at which such action takes place.
ARTICLE X
GENERAL PROVISIONS
SECTION 10.1 DIVIDENDS
Subject to the Virginia Stock Corporation Act and to any provisions of the
Articles of Incorporation relating to dividends, dividends upon the outstanding
capital stock of the Corporation may be declared by the Board of Directors at
any annual, regular or special meeting and may be paid in cash, in property or
in shares of the Corporation's capital stock.
SECTION 10.2 RESERVES
The Board of Directors, in its sole discretion, may fix a sum to be set
aside or reserved over and above the paid-in capital of the Corporation for
working capital or as a reserve for any other proper purpose, and from time to
time may increase, diminish or vary such fund or funds.
SECTION 10.3 FISCAL YEAR
The fiscal year of the Corporation shall be as determined from time to time
by the Board of Directors.
SECTION 10.4 SEAL
The corporate seal shall have inscribed thereon the name of the
Corporation, the year of its organization and the words "Corporate Seal" and
"Commonwealth of Virginia." The corporate seal may be used by causing it or a
facsimile thereof to be impressed, affixed, reproduced or otherwise placed upon
documents representing acts of the Corporation.
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SECTION 10.5 ANNUAL REPORTS
Between January 1 and March 1 of each year after the calendar year in which
it is incorporated, the Corporation shall file with the State Corporation
Commission an annual report on the form furnished by the Commission for that
purpose.
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ANNEX E
ARTICLE 15 OF THE VIRGINIA STOCK CORPORATION ACT
DISSENTERS' RIGHTS
sec. 13.1-729. DEFINITIONS. -- In this article:
"CORPORATION" means the issuer of the shares held by a dissenter before the
corporate action, except that (i) with respect to a merger, "corporation" means
the surviving corporation by merger of that issuer, and (ii) with respect to a
share exchange, "corporation" means the acquiring corporation by share exchange,
rather than the issuer, if the plan of share exchange places the responsibility
for dissenter's rights on the acquiring corporation.
"DISSENTER" means a shareholder who is entitled to dissent from corporate
action under sec. 13.1-730 and who exercises that right when and in the manner
required by secs. 13.1-732 through 13.1-739.
"FAIR VALUE" with respect to a dissenter's shares, means the value of the
shares immediately before the effectuation of the corporate action to which the
dissenter objects, excluding any appreciation or depreciation in anticipation of
the corporate action unless exclusion would be inequitable.
"INTEREST" means interest from the effective date of the corporate action
until the date of payment, at the average rate currently paid by the corporation
on its principal bank loans or, if none, at a rate that is fair and equitable
under all the circumstances.
"RECORD SHAREHOLDER" means the person in whose name shares are registered
in the records of a corporation or the beneficial owner of shares to the extent
of the rights granted by a nominee certificate on file with a corporation.
"BENEFICIAL SHAREHOLDER" means the person who is a beneficial owner of
shares held by a nominee as the record shareholder.
"SHAREHOLDER" means the record shareholder or the beneficial shareholder.
(1985, c. 522.)
sec. 13.1-730. RIGHT TO DISSENT. -- A. A shareholder is entitled to dissent
from and obtain payment of the fair value of his shares in the event of any of
the following corporate actions:
1. Consummation of a plan of merger to which the corporation is a party (i)
if shareholder approval is required for the merger by sec. 13.1-718 or the
articles of incorporation and the shareholder is entitled to vote on the merger
or (ii) if the corporation is a subsidiary that is merged with its parent under
sec. 13.1-719;
2. Consummation of a plan of share exchange to which the corporation is a
party as the corporation whose shares will acquired. If the shareholder is
entitled to vote on the plan;
3. Consummation of a sale or exchange of all, or substantially all of the
property of the corporation other than in the usual and regular course of
business, if the shareholder in entitled to vote on the sale or exchange,
including a sale is dissolution, but not including a sale pursuant to court
order or a sale for cash pursuant to a plan by which all or substantially all of
the net proceeds of the sale will be distributed to the shareholders within one
year after the date of sale;
4. Any corporate action taken pursuant to a shareholder vote to the extent
the articles of incorporation, bylaws, or a resolution of the board of directors
provides that voting or nonvoting shareholders are entitled to dissent and
obtain payment for their shares.
B. A shareholder entitled to dissent and obtain payment for his shares
under this article may not challenge the corporate action creating his
entitlement unless the action is unlawful or fraudulent with respect to the
shareholder or the corporation.
C. Notwithstanding any other provision of this article, with respect to a
plan of merger or share exchange or a sale or exchange of property there shall
be no right of dissent in favor of holders of shares of any class or
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series which, at the record date fixed to determine the shareholders entitled to
receive notice of and to vote at the meeting at which the plan of merger or
share exchange or the sale or exchange of property is to be acted on, were (i)
listed on a national securities exchange or (ii) held by at least 2,000 record
shareholders, unless in either case:
1. The articles of incorporation of the corporation issuing such shares
provide otherwise;
2. The holders of the class or series are required under the plan of merger
or share exchange or the agreement for the sale or exchange of property to
accept for such shares anything except:
a. Cash;
b. Shares or shares and cash in lieu of fractional shares of the surviving
or acquiring corporation or of any other corporation which, at the record date
fixed to determine the shareholders entitled to receive notice of and to vote at
the meeting at which the plan of merger or share exchange is to be acted on,
were either listed subject to notice of issuance on a national securities
exchange or held of record by at least 2,000 record shareholders; or
c. A combination of cash and shares as set forth in paragraph 2a and 2b of
this subsection; or
3. The transaction to be voted on is an "affiliated transaction" as defined
in sec. 13.1-725.
D. The right of a dissenting shareholder to obtain payment of the fair
value of his shares shall terminate upon the occurrence of any one of the
following events:
1. The proposed corporate action is abandoned or rescinded;
2. A court having jurisdiction permanently enjoins or sets aside the
corporate action; or
3. His demand for payment is withdrawn with the written consent of the
corporation. (Code 1950 secs. 13-85, 13.1-75, 13.1-78; 1956, c. 428; 1968, c.
733; 1972, c. 425; 1975, c.
500; 1984, c. 613; 1985, c. 522.)
sec. 13.1-731. DISSENT BY NOMINEES AND BENEFICIAL OWNERS. -- A. A record
shareholder may assert dissenters' rights as to fewer than all the shares
registered in his name only if he dissents with respect to all shares
beneficially owned by any one person and notifies the corporation in writing of
the name and address of each person on whose behalf he asserts dissenters'
rights. The rights of a partial dissenter under this subsection are determined
as if the shares as to which he dissents and his other shares were registered in
the names of different shareholders.
B. A beneficial shareholder may assert dissenters' rights as to shares held
on his behalf only if;
1. He submits to the corporation the record shareholder's written consent
to the dissent not later than the time the beneficial shareholder asserts
dissenters' rights; and
2. He does so with respect to all shares of which he is the beneficial
shareholder or over which he has power to direct the vote (Code 1950,
secs. 13-85, 13.1-75, 13.1-78; 1956, c. 428; 1968, c. 733; 1972, c. 425;
1975, c. 500; 1984, c. 613; 1985, c. 522.)
sec.13.1-732. NOTICE OF DISSENTERS' RIGHTS. -- A. If proposed corporate
action creating dissenters' rights under sec. 13.1-730 is submitted to a vote at
a shareholders' meeting, the meeting notice shall state that shareholders are or
may be entitled to assert dissenters' rights under this article and be
accompanied by a copy of this article.
B. If corporate action creating dissenters' rights under sec. 13.1-730 is
taken without a vote of shareholders, the corporation, during the ten-day period
after the effectuation of such corporate action, shall notify in writing all
record shareholders entitled to assert dissenters' rights that the action was
taken and send them the dissenters' notice described in sec. 13.1-734. (1985, c.
522.)
sec. 13.1-733. NOTICE OF INTENT TO DEMAND PAYMENT. -- A. If proposed
corporate action creating dissenters' rights under sec. 13.1-730 is submitted to
a vote at a shareholders' meeting, a shareholder
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who wishes to assert dissenters' rights (i) shall deliver to the corporation
before the vote is taken written notice of his intent to demand payment for his
shares if the proposed action is effectuated and (ii) shall not vote such shares
in favor of the proposed action.
B. A shareholder who does not satisfy the requirements of subsection A of
this section is not entitled to payment for his shares under this article. (Code
1950, secs. 13-85, 13.1-75, 13.1-78; 1956, c. 428; 1968, c. 733; 1972, c.
425; 1975, c. 500; 1984, c. 613; 1985, c. 522.)
sec. 13.1-734. DISSENTERS' NOTICE. -- A. If proposed corporate action
creating dissenters' rights under sec. 13.1-730 is authorized at a shareholders'
meeting, the corporation, during the ten-day period after the effectuation of
such corporate action, shall deliver a dissenters' notice in writing to all
shareholders who satisfied the requirements of sec. 13.1-733
B. The dissenters' notice shall:
1. State where the payment demand shall be sent and where and when
certificates for certificated shares shall be deposited;
2. Inform holders of uncertificated shares to what extent transfer of the
shares will be restricted after the payment demand is received;
3. Supply a form for demanding payment that includes the date of the first
announcement to news media or to shareholders of the terms of the proposed
corporate action and requires that the person asserting dissenters' rights
certify whether or not he acquired beneficial ownership of the shares before or
after that date;
4. Set a date by which the corporation must receive the payment demand,
which date may not be fewer than thirty nor more than sixty days after the date
of delivery of the dissenters' notice; and
5. Be accompanied by a copy of this article. (Code 1950, secs. 13-85,
13.1-75, 13.1-78; 1956, c. 428; 1968, c. 733; 1972, c. 425; 1975, c. 500; 1984,
c. 613; 1985, c. 522.)
sec. 13.1-735. DUTY TO DEMAND PAYMENT. -- A. A shareholder sent a
dissenters' notice described in sec. 13.1-734 shall demand payment, certify that
he acquired beneficial ownership of the shares before or after the date required
to be set forth in the dissenters' notice pursuant to paragraph 3 of subsection
B of sec. 13.1-734, and, in the case of certificated shares, deposit his
certificates in accordance with the terms of the notice.
B. The shareholder who deposits his shares pursuant to subsection A of this
section retains all other rights of a shareholder except to the extent that
these rights are canceled or modified by the taking of the proposed corporate
action.
C. A shareholder who does not demand payment and deposits his share
certificates where required, each by the date set in the dissenters' notice, is
not entitled to payment for his shares under this article. (Code 1950,
secs. 13-85, 13.1-75, 13.1-78; 1956, c. 428; 1968, c. 733; 1972, c. 425;
1975, c. 500; 1984, c. 613; 1985, c. 522.)
sec. 13.1-736. SHARE RESTRICTIONS. -- A. The corporation may restrict the
transfer of uncertificated shares from the date the demand for their payment is
received.
B. The person for whom dissenters' rights are asserted as to uncertificated
shares retains all other rights of a shareholder except to the extent that these
rights are canceled or modified by the taking of the proposed corporate action.
(Code 1950, secs. 13-85, 13.1-75, 13.1-78; 1956, c. 428; 1968, c. 733; 1972,
c. 425; 1975, c. 500; 1984, c. 613; 1985, c. 522.)
sec. 13.1-737. PAYMENT. -- A. Except as provided in sec. 13.1-738, within
thirty days after receipt of a payment demand made pursuant to sec. 13.1-735,
the corporation shall pay the dissenter the amount the corporation estimates to
be the fair value of his shares, plus accrued interest. The obligation of the
corporation under this paragraph may be enforced (i) by the circuit court in the
city or county where the corporation's principal office is located, or, if none
in this Commonwealth, where its registered office is located or (ii) at the
election of any dissenter residing or having its principal office in the
Commonwealth, by the circuit court in the city or county where the dissenter
resides or has its principal office. The court shall dispose of the complaint on
an expedited basis.
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B. The payment shall be accompanied by:
1. The corporation's balance sheet as of the end of a fiscal year ending
not more than sixteen months before the effective date of the corporate action
creating dissenters' rights, an income statement for that year, a statement of
changes in shareholders' equity for that year, and the latest available interim
financial statements, if any;
2. An explanation of how the corporation estimated the fair value of the
shares and of how the interest was calculated;
3. A statement of the dissenters' right to demand payment under
sec. 13.1-739; and
4. A copy of this article. (Code 1950, secs. 13-85, 13.1-75, 13.1-78;
1956, c. 428; 1968, c. 733; 1972, c. 425; 1975, c. 500; 1984, c. 613; 1985, c.
522.)
sec. 13.1-738. AFTER-ACQUIRED SHARES. -- A. A corporation may elect to
withhold payment required by sec. 13.1-737 from a dissenter unless he was the
beneficial owner of the shares on the date of the first publication by news
media or the first announcement to shareholders generally, whichever is earlier,
of the terms of the proposed corporate action, as set forth in the dissenters'
notice.
B. To the extent the corporation elects to withhold payment under
subsection A of this section, after taking the proposed corporate action, it
shall estimate the fair value of the shares, plus accrued interest, and shall
offer to pay this amount to each dissenter who agrees to accept it in full
satisfaction of his demand. The corporation shall send with its offer an
explanation of how it estimated the fair value of the shares and of how the
interest was calculated, and a statement of the dissenter's right to demand
payment under sec. 13.1-739. (1985, c. 522.)
sec. 13.1-739. PROCEDURE IF SHAREHOLDER DISSATISFIED WITH PAYMENT OR
OFFER. -- A. A dissenter may notify the corporation in writing of his own
estimate of the fair value of his shares and amount of interest due, and demand
payment of his estimate (less any payment under sec. 13.1-737), or reject the
corporation's offer under sec. 13.1-738 and demand payment of the fair value of
his shares and interest due, if the dissenter believes that the amount paid
under sec. 13.1-737 or offered under sec. 13.1-738 is less than the fair value
of his shares or that the interest due is incorrectly calculated.
B. A dissenter waives his right to demand payment under this section unless
he notifies the corporation of his demand in writing under subsection A of this
section within thirty days after the corporation made or offered payment for his
shares. (Code 1950, secs. 13-85, 13.1-75, 13.1-78; 1956, c. 428; 1968, c.
733; 1972, c. 425; 1975, c. 500; 1984, c. 613; 1985, c. 522.)
sec. 13.1-740. COURT ACTION. -- A. If a demand for payment under
sec. 13.1-739 remains unsettled, the corporation shall commence a proceeding
within sixty days after receiving the payment demand and petition the circuit
court in the city or county described in subsection B of this section to
determine the fair value of the shares and accrued interest. If the corporation
does not commence the proceeding within the sixty-day period, it shall pay each
dissenter whose demand remains unsettled the amount demanded.
B. The corporation shall commence the proceeding in the city or county
where its principal office is located, or, if none in this Commonwealth, where
its registered office is located. If the corporation is a foreign corporation
without a registered office in this Commonwealth, it shall commence the
proceeding in the city or county in this Commonwealth where the registered
office of the domestic corporation merged with or whose shares were acquired by
the foreign corporation was located.
C. The corporation shall make all dissenters, whether or not residents of
this Commonwealth, whose demands remain unsettled parties to the proceeding as
in an action against their shares and all parties shall be served with a copy of
the petition. Nonresidents may be served by registered or certified mail or by
publication as provided by law.
D. The corporation may join as a party to the proceeding any shareholder
who claims to be a dissenter but who has not, in the opinion of the corporation,
complied with the provisions of this article. If the court
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determines that such shareholder has not complied with the provisions of this
article, he shall be dismissed as a party.
E. The jurisdiction of the court in which the proceeding is commenced under
subsection B of this section is plenary and exclusive. The court may appoint one
or more persons as appraisers to receive evidence and recommend a decision on
the question of fair value. The appraisers have the powers described in the
order appointing them, or in any amendment to it. The dissenters are entitled to
the same discovery rights as parties in other civil proceedings.
F. Each dissenter made a party to the proceeding is entitled to judgment
(i) for the amount, if any, by which the court finds the fair value of his
shares, plus interest, exceeds the amount paid by the corporation or (ii) for
the fair value, plus accrued interest, of his after-acquired shares for which
the corporation elected to withhold payment under sec. 13.1-738. (Code 1950,
secs. 13-85, 13.1-75, 13.1-78; 1956, c. 428; 1968, c. 733; 1972, c. 425;
1975, c. 500; 1984, c. 613; 1985, c. 522.)
sec. 13.1-741. COURT COSTS AND COUNSEL FEES. -- A. The court in an
appraisal proceeding commenced under sec. 13.1-740 shall determine all costs of
the proceeding, including the reasonable compensation and expenses of appraisers
appointed by the court. The court shall assess the costs against the
corporation, except that the court may assess costs against all or some of the
dissenters, in amounts the court finds equitable, to the extent the court finds
the dissenters did not act in good faith in demanding payment under
sec. 13.1-739.
B. The court may also assess the reasonable fees and expenses of experts,
excluding those of counsel, for the respective parties, in amounts the court
finds equitable:
1. Against the corporation and in favor of any or all dissenters if the
court finds the corporation did not substantially comply with the requirements
of secs. 13.1-732 through 13.1-739; or
2. Against either the corporation or a dissenter, in favor of any other
party, if the court finds that the party against whom the fees and expenses are
assessed did not act in good faith with respect to the rights provided by this
article.
C. If the court finds that the services of counsel for any dissenter were
of substantial benefit to other dissenters similarly situated, the court may
award to these counsel reasonable fees to be paid out of the amounts awarded the
dissenters who were benefited.
D. In a proceeding commenced under subsection A of sec. 13.1-737 the court
shall assess the costs against the corporation, except that the court may assess
costs against all or some of the dissenters who are parties to the proceeding,
in amounts the court finds equitable, to the extent the court finds that such
parties did not act in good faith in instituting the proceeding. (Code 1950,
secs. 13-85, 13.1-75, 13.1-78; 1956, c. 428; 1968, c. 733; 1972, c. 425;
1975, c. 500; 1984, c. 613; 1985, c. 522.)
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ANNEX F
MCCAW INTERNATIONAL (BRAZIL), LTD.
SHAREHOLDERS AGREEMENT
THIS SHAREHOLDERS AGREEMENT (this "Agreement") is made as of
____________________, 199__, by and among McCaw International (Brazil), Ltd., a
Virginia corporation, formerly named Wireless Ventures of Brazil, Inc. (the
"Company"), and the Persons listed as Shareholders on Exhibit I attached hereto,
as amended from time to time, including McCaw International, Ltd., a Washington
corporation ("MIL"), Telcom Ventures, LLC, a Delaware limited liability company
("Telcom") and the other Shareholders listed as the Founders on the signature
pages to this Agreement (the "Founders") (collectively, the "Shareholders" and,
individually, a "Shareholder").
RECITALS
The Founders are the owners of all of the Company's Class B Common Stock
and MIL is the owner of all of the Company's Class A Common Stock (together with
the Class B Common Stock, the "Common Stock"), and the Shareholders desire to
enter into certain agreements relating to transfers of Common Stock and other
issues relating to the Company.
AGREEMENT
NOW, THEREFORE, for good and valuable consideration the receipt and
sufficiency of which are acknowledged and to further the interests of the
Company and its present and future Shareholders, the parties agree as follows:
1. TRANSFERABILITY
1.1 TRANSFERS
Except as otherwise provided in this Agreement, no Shareholder may sell,
assign, transfer, pledge, hypothecate, mortgage, encumber or otherwise transfer
to any Person (as defined in the Agreement and Plan of Merger between Nextel
Communications, Inc., Dial Call Indimich, Inc. and the Company dated October 28,
1996 (the "Merger Agreement")) other than to one of its Affiliates (as defined
in the Merger Agreement) or other than in connection with the grant of a
security interest to secure a bona fide third-party financing (collectively,
"Transfer," including, with correlative meanings, the terms "Transferring" and
"Transferred") all or any part of any shares of Common Stock or other securities
of the Company convertible into or exercisable for Common Stock (collectively,
the "Shares") unless the Shareholder proposing such a Transfer (the "Selling
Shareholder") has complied with the provisions of this Section 1.
1.2 RESTRICTIVE LEGEND
Each certificate representing (a) Shares or (b) any other securities issued
in respect of the Shares upon any stock split, stock dividend, recapitalization,
merger, consolidation or similar event shall be stamped or otherwise imprinted
with a legend setting forth the transfer restrictions imposed by this Agreement
and applicable law as required by Section 10.2. The Shareholders consent to the
Company' making a notation on its records and giving instructions to any
transfer agent of the Shares in order to implement the restrictions on Transfer
established in this Section 1.
1.3 RIGHT OF FIRST REFUSAL
1.3.1 TRANSFERS BY SHAREHOLDERS
Except as otherwise provided in this Agreement, no Founder may Transfer any
interest, direct or indirect, in all or any part of the Shares owned by such
Shareholder (a) during the period beginning on the date hereof
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and ending on the date two years and 90 days after the date hereof (the "Grace
Period") and (b) after the expiration of the Grace Period, unless, in the case
of this clause (b) only, (i) the Selling Shareholder shall have made an offer to
sell such Shares to the other Shareholders and the Company as provided in this
Section 1.3 and (ii) such offer shall not have been accepted in the manner
described in this Section 1.3. No Shareholder (including the Founders
collectively) having beneficial ownership of less than 10% of the Common Stock
at the time of any proposed Transfer by any other Shareholder shall have rights
of first refusal as provided in this Section 1.3.
1.3.2 OFFER BY SELLING SHAREHOLDER
The offer referred to in Section 1.3.1 shall consist of a written offer
(the "Offer") to the other Shareholders entitled to rights of first refusal (the
"Offerees") to sell the Shares proposed to be Transferred (the "Offered
Shares"). The Offer shall set forth (a) a statement of intention to effect a
Transfer, (b) the number and class of Offered Shares, (c) the terms and
conditions of the proposed Transfer, including (i) the purchase price for the
Offered Shares and (ii) the identity and beneficial ownership of the third party
or parties having made a bona fide offer to purchase the Offered Shares on such
terms and conditions, and (d) the desired closing date of the transaction.
1.3.3 ACCEPTANCE OF OFFER
Within 30 days after its receipt of the Offer, the Offerees may, at their
option, accept the Offer as to all or less than all of the Offered Shares by
giving irrevocable written notice to the Selling Shareholder, the Company and
the other Shareholders prior to the expiration of such 30-day period.
1.3.4 PRO RATA PORTION
The Offered Shares shall first be allocated to the Offerees. If the
Offerees shall not have offered to purchase all the Offered Shares, the Company
may elect to purchase any remaining Offered Shares. To the extent that more than
one Offeree shall have elected to purchase Offered Shares pursuant to Section
1.3.3, each such Offeree may purchase up to its pro rata portion of such Offered
Shares as determined in accordance with this Section 1.3.4. Each Offeree's pro
rata portion of the Offered Shares is that proportion of the Offered Shares as
the number of shares of voting capital stock of the Company held by such Offeree
bears to the aggregate number of shares of voting capital stock of the Company
held by such Offeree and all other Offerees who have exercised their rights of
first refusal under this Section 1.3.
1.3.5 CLOSING
If the Offer is accepted as to all the Offered Shares, the parties shall
use their best efforts to complete the closing of such purchase within 30 days
after acceptance of the Offer. If, after expiration of such 30-day period, the
closing of such purchase of all Offered Shares shall not have occurred (unless
closing is subject only to receipt of required governmental or regulatory
approvals) through no fault of the Selling Shareholder, then the Selling
Shareholder may treat the Offer as having been rejected in its entirety. If the
Offer is not accepted as to all the Offered Shares as provided in this Section
1.3, or is deemed to be rejected as set forth in the previous sentence, the
Selling Shareholder may for a period of 60 days after such nonacceptance or
deemed rejection Transfer the Offered Shares to the third party or parties
designated in the Offer and on the terms and conditions specified in the Offer.
A proposed Transfer after the expiration of such 60-day period or on any other
terms shall again be subject to the rights of first refusal and other provisions
of this Section 1.
1.4 TAG-ALONG RIGHTS
1.4.1 TRANSFERS BY MIL
Except as otherwise provided in this Agreement, neither MIL nor any
Affiliate of MIL may Transfer all or any part of the Shares owned by MIL or such
Affiliate unless (a) MIL or such Affiliate shall have sent to each other
Shareholder (each a "Tag-Along Offeree") a written offer (the "Tag-Along Offer")
to include in such Transfer all or any portion of such Tag-Along Offeree's
Tag-Along Shares (as defined below) at the
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same price and on the same terms as MIL or such Affiliate shall Transfer its
Shares and (b) such offer shall not have been accepted in the manner described
in this Section 1.4. Each Tag-Along Offeree's "Tag-Along Shares," which shall be
calculated separately for each class of Shares included in the Offered Shares,
shall mean that number of Shares of such class as is equal to the number of
Shares of such class then owned by such Tag-Along Offeree multiplied by a
fraction, the numerator of which is the number of Shares of such class being
sold by MIL and its Affiliates and the denominator of which is the number of
Shares of such class then owned by MIL and its Affiliates.
1.4.2 TAG-ALONG OFFER
The Tag-Along Offer shall consist of a written offer to the Tag-Along
Offerees to sell the Shares proposed to be Transferred (the "Proposed Shares").
The Tag-Along Offer shall set forth (a) a statement of intention to effect such
a Transfer, (b) the number and class of Proposed Shares, (c) the terms and
conditions of the proposed Transfer, including the purchase price for the
Proposed Shares, and (d) the desired closing date of the transaction.
1.4.3 ACCEPTANCE OF TAG-ALONG OFFER
Within 30 days after its receipt of the Tag-Along Offer, each Tag-Along
Offeree may, at its option, accept the Tag-Along Offer as to all or less than
all of such Tag-Along Offeree's Tag-Along Shares by giving irrevocable written
notice to MIL, the Company and the other Shareholders prior to the expiration of
such 30-day period. Any Tag-Along Shares to be Transferred by Tag-Along Offerees
shall be substituted for an equal number of Proposed Shares.
1.4.4 CLOSING
MIL and those Tag-Along Offerees having accepted the Tag-Along Offer shall
use their best efforts to complete the closing of any such Transfer within 30
days after the end of the 30-day offering period. If MIL and the Tag-Along
Offerees shall fail to complete such Transfer within such 30-day closing period
(unless closing is delayed due to the need for required governmental or
regulatory approvals), or if MIL and the Tag-Along Offerees propose to effect a
Transfer on different terms than those permitted by the Tag-Along Offer pursuant
to Section 1.4.2, then any proposed Transfer shall again be subject to all the
Transfer restrictions set forth in this Section 1.
1.5 DRAG-ALONG RIGHTS OF MIL
1.5.1 RIGHT TO REQUIRE SALE OF THE COMPANY
Notwithstanding the other provisions of this Section 1, if MIL and its
Affiliates seek to effect a transaction involving a bona fide sale of their
entire interest in the Company to an unrelated third party or parties (a
"Buyer"), whether by sale of shares, sale of all or substantially all assets,
merger or otherwise (a "Sale"), the other Shareholders will, upon notice from
MIL after compliance with the provisions of this Section 1.5, take all
commercially reasonable actions required to assist in effecting such Sale,
including, without limitation, Transferring or agreeing to Transfer the Shares
owned by them at a price equal to that at which MIL is Transferring Shares and
otherwise on identical terms and voting in favor of a transaction that results
in such a Transfer.
1.5.2 PROCEDURE
MIL shall give written notice to the Company's Board of Directors (the
"Board") and the other Shareholders of MIL's intent to effect a Sale of the
Company. MIL may for a period of 180 days after such notice seek to effect a
Sale of the Company to a Buyer. If such Sale shall not have closed within such
180-day period (unless closing is delayed due to the need for required
governmental or regulatory approval), any proposed Transfer shall again be
subject to all the Transfer restrictions set forth in this Section 1.
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1.6 NO OTHER TRANSFER EFFECTIVE
Except as provided in this Section 1, no Transfer of any right, title or
interest in the Shares shall be effective, and the Company shall not record or
recognize any such Transfer, until there has been compliance with the provisions
of this Agreement. If no Offer is made as herein required, the Shareholders may
nevertheless exercise their rights hereunder as to the Shares subject to any
proposed Transfer, and they may do so at any time, including after the Transfer
of the Shares.
2. VOTING
2.1 VOTING OF SHARES
Each Shareholder shall vote all Shares owned by such Shareholder, or as to
which such Shareholder has voting power, pursuant to the provisions of this
Agreement.
2.2 ELECTION OF DIRECTORS
In elections of directors of the Company, the Shareholders shall vote in
favor of (a) one or more candidates designated by the Founders, which candidates
would represent no more than 10% of the directors of the Company; providedthat
so long as the Founders shall collectively own 10% or more of the Common Stock,
the Founders shall have the right to designate at least one candidate for
election to the Board and (b) all other candidates, all of whom shall have been
designated by MIL. If at any time the Founders shall collectively own less than
10% of the Common Stock, the director or directors designated for election to
the Board by the Founders (the "Founder Director") shall resign as a director.
The Founders shall not have the right to designate any candidates for election
to the board of directors or comparable governing body of any subsidiary of the
Company.
2.3 VOTING TRUST
If MIL and its Affiliates shall at any time have beneficial ownership of
less than 50% but more than 25% of the Common Stock, the Founders and the
Founder Director shall, subject to their fiduciary duties to the Company and all
Shareholders, execute any legal document required by appropriate law, and
thereafter cast all votes in favor of or against matters to be approved by the
shareholders of the Company or the Board, as the case may be, in the same manner
as MIL and its Affiliates and the directors nominated thereby, respectively;
provided that this Section 2.3 shall not diminish any rights which the Founders
otherwise have under Article Seven of the Company's Articles of Incorporation.
3. REPURCHASE AT OPTION OF COMPANY OF COMMON STOCK OWNED BY FOUNDERS
(a) If the Founder Director fails to approve any action proposed to the
Board pursuant to Article Seven of the Company's Articles of Incorporation, or
if the holders of Class B Common Stock fail to approve any such action proposed
to the shareholders of the Company, the Company shall have the right, by written
notice to the Founders given within 30 days of the vote of the Board, and upon
approval of a simple majority of the directors of the Company (excluding the
Founder Director), to repurchase all, but not less than all, of the Common Stock
then owned by the Founders. Such repurchase shall close within 30 days of the
final determination of Fair Market Value, subject only to completion of the
appraisal process and receipt of required governmental or regulatory approvals.
The repurchase price (the "Repurchase Price") shall equal the Appraised Fair
Market Value (as defined below) of the Company as of the exercise date
multiplied by a fraction, the numerator of which is the number of shares of
Common Stock then owned by the Founders and the denominator of which is the
total number of Shares (calculated on a fully diluted basis at the stated
exercise price of all options). The Repurchase Price shall, at the Company's
election, be payable in cash, common stock of Nextel Communications, Inc.
("Nextel Common Stock") or any combination thereof. Any Nextel Common Stock used
as part of the Repurchase Price shall be either registered with the U.S.
Securities and Exchange Commission (the "SEC") or registrable at the election of
the Founders, exercisable by Telcom on behalf of the Founders, within 30 days
after closing of the repurchase right. The Nextel Common Stock shall be valued
at the average of the closing price of the Nextel Common Stock on the principal
trading
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market on which such shares are traded over the 20 trading days prior to closing
of the repurchase transaction. If paid in cash, the Repurchase Price shall be
payable in four equal quarterly installments, beginning on the date of closing
of the repurchase right and on each three-month anniversary thereof, with
interest accruing on the unpaid principal at an annual rate equal to the annual
rate of interest publicly announced by The Chase Manhattan Bank, N.A., or any
successor thereto, in New York City as its prime rate from time to time (the
"Prime Rate") plus 1%.
(b) For purposes of this Agreement, "Fair Market Value" means the price
that an unrelated third party would pay if it were to acquire all outstanding
Shares (including all outstanding vested options at the stated exercise price
thereof) in an arm's-length transaction, assuming that the Shares were being
sold in a manner designed to attract all possible participants and without
taking into consideration a control premium or minority discount. The "Appraised
Fair Market Value" shall be determined in accordance with the following
procedures: MIL shall select an investment banking firm of recognized national
standing (the "First Appraiser"), which shall appraise the Fair Market Value and
deliver its appraisal to the Company, Telcom and MIL, within 60 days of its
engagement. If Telcom shall disagree with the Fair Market Value determined by
such appraiser, then Telcom shall have the right to appoint an additional
investment banking firm of recognized national standing (the "Second
Appraiser"). If Telcom does not engage a Second Appraiser within 30 days of the
First Appraiser's delivery of its appraisal, the First Appraiser's appraisal
shall be the Appraised Fair Market Value. If Telcom engages a Second Appraiser,
the Second Appraiser will appraise the Fair Market Value, and deliver its
appraisal to the Company, Telcom and MIL, within 60 days of its engagement. If
such difference between the two appraisals is less than 20% of the lower
appraised value, then the Appraised Fair Market Value shall be the average of
the two appraisals. If the difference is greater than or equal to 20% of the
lower appraised value, the two appraisers shall engage a third independent
investment banking firm of recognized national standing (the "Third Appraiser"),
which shall appraise the Fair Market Value within 60 days of its engagement. The
Appraised Fair Market Value shall be the average of the two appraised values
which are closest in absolute U.S. dollars. All appraisals of Fair Market Value
shall be as of the date of notice of exercise of the right. The expenses of the
First Appraiser shall be borne by the Company; the expenses of the Second
Appraiser, if any, shall be borne by the Founders; and the expenses of the Third
Appraiser, if any, shall be borne equally by the Company and the Founders.
4. FOREIGN OWNERSHIP RULES
If at any time Brazilian law requires a reduction in the ownership of the
Company by any parties then owning Shares, then
(a) Shares shall be sold on the same date pro rata by all Shareholders
required to sell Shares on the same terms;
(b) such sales shall be at Appraised Fair Market Value, or as close thereto
as achievable under the then-current regulatory conditions;
(c) such sales shall be made only to purchasers acceptable to MIL, which
acceptance shall not be unreasonably withheld; and
(d) the parties shall use their reasonable best efforts to sell such Shares
for cash.
5. CAPITAL CALLS, PREEMPTIVE RIGHTS AND PLEDGES OF COMPANY STOCK
5.1 GRACE PERIOD FOR FOUNDERS
Notwithstanding any capital contributions by any Shareholder to the Company
during the Grace Period, the Founders shall have no obligation to make any pro
rata capital contribution to the Company, and the Shares held by the Founders as
of the date hereof shall retain an aggregate interest in dividends and other
cash or noncash distributions by the Company equal to their aggregate percentage
ownership of the Common Stock (19% as of the date hereof, as such percentage may
be reduced by the issuance of additional shares of Common Stock to any third
party in accordance with Section 5.2) (the "Founders' Percentage"). The
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issuance of Common Stock to MIL or its Affiliates in connection with any such
capital contributions shall not reduce the Founders' Percentage.
5.2 PREEMPTIVE RIGHTS
The Company may at any time issue additional shares of Common Stock to any
third party at fair market value, as determined in good faith by a majority of
the directors of the Company, so long as, after such issuance, the Founders'
Percentage is not reduced to less than 17%. If the Company intends to issue
additional shares of Common Stock to a third party such that the Founders would
own in the aggregate less than 17% of the Common Stock, the Company shall
deliver to the Founders a written notice at least 30 days prior to such proposed
issuance. The Founders shall have the right, exercisable upon irrevocable
written notice delivered to the Company at least 10 days prior to the date of
proposed issuance, to purchase additional shares of Common Stock such that after
such issuance, the Founders would own in the aggregate no more than 17% of the
Common Stock; provided that the Founders may exercise their preemptive rights
only if the Founders in the aggregate exercise such rights with respect to the
maximum number of shares of Common Stock permitted hereunder. If some but not
all of the Founders exercise such right, the number of shares issuable to each
exercising Founder shall bear the same proportion to the aggregate number of
shares issuable to all exercising Founders as the number of shares held by such
exercising Founder prior to such issuance bears to the aggregate number of
shares held by all exercising Founders.
5.3 FOUNDERS' "TRUE-UP" OPTION
On or prior to the last day of the Grace Period, the Founders shall have
the option, exercisable by Telcom on behalf of the Founders, to pay to the
Company an amount equal to (a)(i) the product of the Founders' Percentage
multiplied by the aggregate amount of all capital contributions to the Company
by the Shareholders during the Grace Period (the "Base Amount"), divided by (ii)
100% minus the Founders' Percentage, plus (b) the product of the amount obtained
in (a) multiplied by the Prime Rate plus 1% compounded quarterly from the date
of the Shareholders' capital contribution, (together, the "Antidilution
Payment"). The Company shall deliver to Telcom a notice setting forth the
calculation of the Antidilution Payment at least 30 days prior to the last day
of the Grace Period; provided that the failure of the Company to deliver such
calculation in a timely manner shall not affect the parties' rights and
obligations hereunder; provided, further, that if such notice is not delivered
in a timely manner, Telcom shall pay the Antidilution Payment upon the later of
the last day of the Grace Period and 15 days after delivery of such notice. Any
Antidilution Payment shall be free of all withholding with respect to taxes of
any nature, and if the Founders are required by applicable law to make any such
withholding with respect to any such payment, such Antidilution Payment shall be
increased so that after making all required withholdings, the Company shall
receive an amount equal to the amount it would have received had such
withholdings not been made. Upon receipt in full of the Antidilution Payment,
the Company shall issue to the Founders on a pro rata basis, based on the number
of shares then owned by each Founder, shares of Common Stock such that the
percentage of the Common Stock owned by the Founders after such transfer equals
the Founders' Percentage. If the Founders do not make the Antidilution Payment
on the last day of the Grace Period, the Founders' interests in dividends and
other cash or noncash distributions by the Company shall thereafter be
proportionate to their respective shareholdings in the Company. If the Founders
make the Antidilution Payment, notwithstanding an offer from the other
Shareholders to sell Common Stock to the Founders in exchange for an amount
equal to the Base Amount in a transaction that would result in the Founders
owning a share of the Common Stock equal to the Founders' Percentage, and if WVB
within 30 days of the making of the Antidilution Payment declares a taxable cash
distribution that is less than or equal to the Antidilution Payment, then the
Founders shall make an additional payment to the other Shareholders such that
such Shareholders receive a net amount per share of Common Stock after payment
of applicable taxes equal to the gross amount per share of Common Stock of such
cash distribution.
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5.4 PLEDGES OF COMMON STOCK
If the Company or any of the WVB Affiliates shall enter into a financing
arrangement pursuant to which the lender requires the pledge of all of the
Common Stock as security for such financing, and MIL and its Affiliates agree to
pledge the Common Stock owned by them, then the Founders shall simultaneously
pledge the Common Stock owned by them on the same terms and conditions as MIL
and its Affiliates; provided that such lender shall have no recourse against the
Founders in connection with such financing other than to the Common Stock so
pledged and such pledge shall expressly permit the exercise and consummation of
any repurchase right held by a holder of Class B Common Stock pursuant to the
Company's Articles of Incorporation.
6. INTEREST OF SPOUSE
6.1 INTEREST OF SPOUSE SUBJECT TO AGREEMENT
Any property interest in the Shares now owned or hereafter acquired by the
spouse of a Shareholder shall be subject to the terms of this Agreement and
shall be subject to the same restrictions on Transfer described in Section 1 as
if such interests were owned by a Shareholder and as if such spouse were a
Shareholder.
6.2 SIGNATURE OF SPOUSES
Each Shareholder's spouse signing this Agreement acknowledges that he or
she has read this Agreement and understands its contents, specifically this
Section 6. Notwithstanding the foregoing, absence of a spouse's signature hereto
shall not alter the effectiveness hereof or the enforceability of the provisions
contained herein as against such spouse or any Shareholder.
Each spouse acknowledges that he or she has had the opportunity to obtain
separate and independent counsel of his or her own choosing prior to signing
this Agreement and has waived such right. Each spouse agrees that the Shares and
any interest, community or otherwise, he or she has in them are subject to the
provisions of this Agreement. Each spouse also agrees that his or her
Shareholder-spouse may join in any future amendments or modifications of this
Agreement without any further signature, acknowledgment, agreement or consent on
his or her part and he or she designates his or her Shareholder-spouse
attorney-in-fact for this purpose. Furthermore, each spouse agrees to take no
action at any time to hinder the operation of this Agreement as to the Shares in
which he or she has an interest.
7. TERMINATION
This Agreement shall lapse and be of no further force or effect upon the
first of the following to occur:
(a) Merger, Sale or Liquidation. The approval by the Board and the
Shareholders, as required by law and by the Company's Articles of Incorporation
and Bylaws, of the merger of the Company with any other company as a result of
which securities representing all or substantially all of the voting power of
the Company are held by Persons that had less than a majority interest, directly
or indirectly, in such securities prior to such merger, or of the sale of all or
substantially all of the assets of the Company, or of its liquidation.
(b) Agreement of Shareholders. The written agreement of holders of not
less than 97% of the Common Stock to the termination of this Agreement.
(c) Public Offering. The closing of an offering by the Company of its
equity securities to the public pursuant to a registration statement filed
pursuant to the U.S. Securities Act of 1933, as amended (the "Act"), or the
equivalent legislation of another country.
(d) Lapse of Time. The expiration of 21 years after the death of the last
to die of the individual Shareholders named herein.
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8. REGISTRATION RIGHTS
8.1 DEFINITIONS
For purposes of these registration rights:
(a) The terms "register," "registered" and "registration" refer to a
registration effected by preparing and filing a registration statement or
similar document in compliance with the Act, and the declaration or ordering of
effectiveness of such registration statement or document;
(b) The term "Registrable Securities" means any Common Stock held by the
Holders, including Common Stock issued as (or issuable upon the conversion or
exercise of any warrant, right or other security which is issued as) a dividend
or other distribution with respect to, or in exchange for or in replacement of,
such Common Stock, excluding in all cases, however, any Registrable Securities
sold by a Person in a transaction in which its rights under this Agreement are
not assigned;
(c) The number of shares of "Registrable Securities then outstanding" shall
be determined by the number of shares of Common Stock outstanding which are, and
the number of shares of Common Stock issuable pursuant to then exercisable or
convertible securities which are, Registrable Securities;
(d) The term "Holder" means MIL, the Founders or any of their Affiliates or
permitted transferees; and
(e) The term "Initiating Holders" means the Holders who initiate the
request for registration under Section 8.2(a).
8.2 REQUEST FOR REGISTRATION
(a) If at any time following six months after the closing of the Company's
initial public offering, the Company shall receive a written request from MIL or
any of its Affiliates or from Holders of at least 50% of the Registrable
Securities then held by the Founders that the Company file a registration
statement under the Act covering the registration for an underwritten public
offering of Registrable Securities with estimated aggregate gross proceeds of at
least $10,000,000, based on a good-faith estimate of the market price of the
Common Stock, then the Company shall, within 10 days of the receipt thereof,
give written notice of such request to all Holders and shall, subject to the
limitations contained in this Section 8, effect the registration under the Act
of all Registrable Securities which the Holders request to be registered by
their giving written notice to the Company within 20 days of the mailing by the
Company of its previous notice to the Holders.
(b) The right of any Holder to include its Registrable Securities in such
registration shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of such Holder's Registrable Securities in the
underwriting to the extent provided herein. All Holders proposing to distribute
their securities through such underwriting shall (together with the Company as
provided in Section 8.4(e)) enter into an underwriting agreement in customary
form with the underwriter or underwriters selected for such underwriting by a
majority in interest of the Initiating Holders, which underwriter must also be
reasonably acceptable to the Company. Notwithstanding any other provision of
this Section 8.2, if the underwriter advises the Company in writing that
marketing factors require a limitation of the number of shares to be
underwritten, then the Company shall so advise all Holders of Registrable
Securities which would otherwise be underwritten pursuant hereto, and the number
of shares of Registrable Securities that may be included in the underwriting
shall be allocated among all Holders thereof, including the Initiating Holders,
in proportion (as nearly as practicable) to the amount of Registrable Securities
of the Company owned by each Holder.
(c) The Company is obligated to effect only one registration pursuant to
this Section 8.2 on behalf of MIL and its Affiliates and one registration
pursuant to this Section 8.2 on behalf of the Founders, their Affiliates and
permitted transferees; provided that, if the number of Registrable Securities to
be registered by either such group is reduced pursuant to Section 8.2(b) to less
than 75% of the Registrable Securities requested to be registered by such group,
such registration shall not be deemed to be such group's demand registration
pursuant to this Section 8.2(c).
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(d) Notwithstanding the foregoing, if the Company shall furnish to Holders
requesting a registration statement pursuant to this Section 8.2 a certificate
signed by the President of the Company stating that, in the good faith judgment
of the Board, it would be seriously detrimental to the Company and its
shareholders for such registration statement to be filed and it is therefore
essential to defer the filing of such registration statement, the Company shall
have the right to defer such filing for a period of not more than 90 days after
receipt of the request of the Initiating Holders.
8.3 COMPANY REGISTRATION
If (but without any obligation to do so) the Company proposes to register
(including for this purpose a registration effected by the Company for
shareholders other than the Holders) any of its stock or other securities under
the Act in connection with the public offering of such securities solely for
cash (other than a registration relating solely to the sale of securities to
participants in a Company stock plan, or a registration on any form that does
not include substantially the same information as would be required to be
included in a registration statement covering the sale of the Registrable
Securities), the Company shall, at each such time, promptly give each Holder
written notice of such registration. Upon the written request of each Holder
given within 20 days after mailing of such notice by the Company, the Company
shall, subject to the provisions of Section 8.7, cause to be registered under
the Act all of the Registrable Securities that each such Holder has so
requested.
8.4 OBLIGATIONS OF THE COMPANY
Whenever required under this Agreement to effect the registration of any
Registrable Securities, the Company shall, as expeditiously as reasonably
possible:
(a) Prepare and file with the SEC a registration statement with respect to
such Registrable Securities and use its best efforts to cause such registration
statement to become effective;
(b) Prepare and file with the SEC such amendments and supplements to such
registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
Act with respect to the disposition of all securities covered by such
registration statement;
(c) Furnish to the Holders such numbers of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of the
Act, and such other documents as they may reasonably request in order to
facilitate the disposition of all securities covered by such registration
statement;
(d) Use its best efforts to register and qualify the securities covered by
such registration statement under such other securities or blue sky laws of such
jurisdictions as shall be reasonably requested by the Holders; provided that the
Company shall not be required in connection therewith or as a condition thereto
to qualify to do business or to file a general consent to service of process in
any such states or jurisdictions;
(e) In the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement, in usual and customary
form, with the managing underwriter of such offering. Each Holder participating
in such underwriting shall also enter into and perform its obligations under
such an agreement; and
(f) Notify each Holder of Registrable Securities covered by such
registration statement, at any time when a prospectus relating thereto covered
by such registration statement is required to be delivered under the Act, of the
happening of any event as a result of which the prospectus included in such
registration statement, as then in effect, includes an untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in the light of the
circumstances then existing.
8.5 FURNISH INFORMATION
It shall be a condition precedent to the obligations of the Company to take
any action pursuant to this Agreement that the selling Holders shall furnish to
the Company such information regarding themselves, the
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Registrable Securities held by them and the intended method of disposition of
such securities as shall be reasonably required to effect the registration of
their Registrable Securities and to execute such documents in connection with
such registration as the Company may reasonably request.
8.6 EXPENSES OF REGISTRATION
In connection with any registration pursuant to this Agreement, the Company
shall be responsible for the payment of all expenses of the registration, with
the exception of underwriting commissions and discounts which shall be paid by
the Company, the Holders and any other selling security holders in proportion to
the aggregate value of the securities offered for sale by each of them.
Notwithstanding the preceding sentence, Holders participating in a registration
pursuant to Section 8.2 shall be responsible for the payment of all expenses
directly related to such registration.
8.7 UNDERWRITING REQUIREMENTS
The Company shall not be required under Section 8.3 to include any of the
Holders' securities in an underwritten offering of the Company's securities
unless such Holders accept the terms of the underwriting as agreed upon between
the Company and the underwriters selected by it. If the total amount of
securities, including Registrable Securities, requested by Holders to be
included in such offering exceeds the amount of securities that the underwriters
reasonably believe compatible with the success of the offering, then the Company
shall be required to include in the offering only that number of such
securities, including Registrable Securities, that the underwriters believe will
not jeopardize the success of the offering. The securities to be included in the
registration in the event of such a reduction shall be apportioned first to the
Company, then pro rata among the selling Holders according to the total amount
of securities requested to be sold in such registration by such Holders, or in
such other proportions as shall mutually be agreed to by such selling Holders.
8.8 DELAY OF REGISTRATION
No Holder shall have any right to obtain or seek an injunction restraining
or otherwise delaying any such registration as the result of any controversy
that might arise with respect to the interpretation or implementation of this
Agreement.
8.9 INDEMNIFICATION
In the event any Registrable Securities are included in a registration
statement under this Agreement:
(a) To the extent permitted by law, the Company will indemnify and hold
harmless each Holder, the partners, officers, agents, employees and directors of
each Holder, any underwriter (as defined in the Act) for such Holder and each
Person, if any, who Controls (as defined in the Merger Agreement) such Holder or
underwriter within the meaning of the Act or the U.S. Securities Exchange Act of
1934, as amended (the "1934 Act"), against any losses, claims, damages or
liabilities (joint or several) to which they may become subject under the Act,
the 1934 Act or other federal or state law, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon any of the following statements, omissions or violations (collectively, a
"Violation"): (i) any untrue statement or alleged untrue statement of a material
fact contained in such registration statement, including any preliminary
prospectus or final prospectus contained therein, in light of the circumstances
under which they were made, or any amendments or supplements thereto, (ii) the
omission or alleged omission to state therein a material fact required to be
stated therein, or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, or (iii) any violation
or alleged violation by the Company of the Act, the 1934 Act, any state
securities law or any rule or regulation promulgated under the Act, the 1934 Act
or any state securities law; and the Company will reimburse each such Holder,
partner, officer, agent, employee or director, underwriter or Controlling Person
for any legal or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided, however, that the indemnity agreement contained in this Section 8.9(a)
shall not apply to amounts paid in settlement of
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any such loss, claim, damage, liability or action if such settlement is effected
without the consent of the Company, which consent shall not be unreasonably
withheld, nor shall the Company be liable in any such case for any such loss,
claim, damage, liability or action to the extent that it arises out of or is
based upon a Violation occurring in reliance upon and in conformity with written
information furnished expressly for use in connection with such registration by,
or on behalf of, any such Holder, underwriter or Controlling Person.
(b) To the extent permitted by law, each selling Holder will indemnify and
hold harmless the Company, each of its officers, directors, agents or employees,
each Person, if any, who Controls the Company within the meaning of the Act, any
underwriter and any other Holder selling securities in such registration
statement or any of its partners, officers, directors, agents or employees or
any Person who Controls such Holder, against any losses, claims, damages or
liabilities (joint or several) to which the Company or any such officer,
director, agent, employee, Controlling Person, or underwriter, or other such
Holder or its partner, officer, director, agent, employee or Controlling Person
may become subject, under the Act, the 1934 Act or other federal or state law,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any Violation, in each case to the
extent (and only to the extent) that such Violation occurs in reliance upon and
in conformity with written information furnished by, or on behalf of, such
Holder expressly for use in connection with such registration; and each such
Holder will reimburse any legal or other expenses reasonably incurred by the
Company or any such partner, officer, director, agent, employee, Controlling
Person, underwriter or other such Holder, partner, officer, director, agent,
employee or Controlling Person in connection with investigating or defending any
such loss, claim, damage, liability or action; provided, however, that the
indemnity agreement contained in this Section 8.9(b) shall not apply to amounts
paid in settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Holder, which consent shall
not be unreasonably withheld.
(c) Promptly after receipt by an indemnified party under this Section 8.9
of notice of the commencement of any action (including any governmental action),
such indemnified party will, if a claim in respect thereof is to be made against
any indemnifying party under this Section 8.9, deliver to the indemnifying party
a written notice of the commencement thereof, and the indemnifying party shall
have the right to participate in, and, to the extent the indemnifying party so
desires, jointly with any other indemnifying party similarly notified, to assume
the defense thereof with counsel mutually satisfactory to the parties; provided,
however, that an indemnified party shall have the right to retain its own
counsel, with the fees and expenses to be paid by the indemnifying party, if, in
the opinion of counsel for the indemnifying party, representation of such
indemnified party by the counsel retained by the indemnifying party would be
inappropriate due to actual or potential differing interests between such
indemnified party and any other party represented by such counsel in such
proceeding. The failure to deliver written notice to the indemnifying party
within a reasonable period of time of the commencement of any such action shall
relieve such indemnifying party of any liability to the indemnified party under
this Section 8.9 to the extent prejudicial to its ability to defend such action,
but the omission so to deliver written notice to the indemnifying party will not
relieve it of any liability that it may have to any indemnified party otherwise
than under this Section 8.9.
8.10 "MARKET STAND-OFF" AGREEMENT
The Holders hereby agree that they shall not, to the extent reasonably
requested by the Company and an underwriter of Common Stock (or other
securities) of the Company, sell or otherwise transfer or dispose of (other than
to donees who agree to be similarly bound) any Registrable Securities for 180
days following the effective date of a registration statement of the Company
filed under the Act; provided, however, that all officers and directors of the
Company and all other Persons with registration rights (whether or not pursuant
to this Agreement) enter into similar agreements.
In order to enforce the foregoing covenant, the Company may impose
stop-transfer instructions with respect to the Registrable Securities of the
Holders (and the shares or securities of every other Person subject to the
foregoing restriction) until the end of such period.
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8.11 RIGHT TO TERMINATE REGISTRATION
The Company shall have the right to terminate or withdraw any registration
initiated by it under this Section 8 prior to the effectiveness of such
registration whether or not any Holder has elected to include securities in such
registration.
9. NONCOMPETITION
Each Shareholder agrees that, until one year following termination of this
Agreement with respect to such Shareholder, neither such Shareholder nor any
Affiliate Controlled by such Shareholder shall in any way, by action or
inaction, directly or indirectly, for itself or for the benefit of any other
Person, own, manage, operate, join, Control or participate in the ownership,
management, operation or Control of any Person that competes with the Company or
any Affiliate thereof, or agrees to do any of the foregoing, in the business of
Specialized Mobile Radio or paging in Brazil, other than wireless radio
engineering, design or program management services and the manufacture and sale
of related software and hardware products; provided that neither any Shareholder
nor any Affiliate Controlled by such Shareholder may maintain an equity interest
in any Person in which it owns an equity interest as of the date hereof, which
equity interest entitles any Shareholder or any Affiliate Controlled by such
Shareholder to control of policymaking or day-to-day operations of such Person
or in connection with which any Shareholder or any Affiliate Controlled by such
Shareholder has a representative on the board of directors, if such Person
elects to engage in the business of cellular communications or Personal
Communications Systems in Brazil.
10. MISCELLANEOUS
10.1 SPECIFIC ENFORCEMENT
Each Shareholder expressly agrees that the Company and the other
Shareholders will be irreparably damaged if this Agreement is not specifically
enforced. Upon a breach or threatened breach of the terms, covenants and/or
conditions of this Agreement by any Shareholder, each of the Company and the
other Shareholders shall, in addition to all other remedies, be entitled to a
temporary or permanent injunction, without showing any actual damage, and/or a
decree for specific performance, in accordance with the provisions of this
Agreement.
10.2 LEGEND
Each certificate evidencing any Shares shall bear a legend substantially as
follows:
The securities represented by this certificate are subject to the terms and
conditions of the Shareholders Agreement among the Company and its Shareholders
dated as of , 199 , as at any time amended, and may not be sold,
transferred or encumbered except in accordance with the terms and provisions of
such Agreement, a copy of which is on file at the principal executive office of
the Company and will be furnished to the holder of this certificate upon request
and without charge.
10.3 DELIVERY OF INFORMATION
The Company shall deliver to each Shareholder and upon written request to
any other Shareholder of the Common Stock:
(a) as soon as practicable, but in any event within 120 days after the end
of each fiscal year of the Company, an income statement for such fiscal year, a
balance sheet of the Company as of the end of such year and a statement of cash
flows for such year, such financial statements to be prepared in accordance with
U.S. generally accepted accounting principles and audited by independent
certified public accountants of nationally recognized standing selected by the
Company, and
(b) as soon as practicable, but in any event within 60 days after the end
of each of the first three fiscal quarters, an income statement for such fiscal
quarter, a balance sheet of the Company as of the end of such
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<PAGE> 172
quarter and a statement of cash flows for such quarter, such financial
statements to be prepared in accordance with U.S. generally accepted accounting
principles and any other operating information provided to the Board.
10.4 INSPECTION
The Company shall permit each Shareholder owning more than 5% of the Common
Stock at such Shareholder's expense to visit and inspect the Company's
properties, to examine its books of accounts and records and to make copies and
extracts therefrom, and to discuss the Company's business prospects, affairs,
finances and accounts with its officers, all at such reasonable times as may be
requested by such Shareholder and for purposes reasonably related to the
business of the Company.
10.5 COMPLIANCE WITH LAWS
Each Shareholder represents, warrants and covenants that it and any
director, officer, agent, employee or other Person acting on its behalf or on
behalf of any Affiliate of it (a) have not been and will not be involved in the
offering, paying or giving of anything of value, either directly or indirectly,
to a government official, political party or candidate for political office to
influence such Person or entity in the discharge of his, her or its official
duties, (b) have not engaged and will not engage in any such unlawful conduct
during the time of carrying out their duties, and (c) have maintained and will
maintain accounting books and records in reasonable detail and institute
internal controls to ensure that such books and records accurately reflect
corporate transactions and the disposition of assets.
10.6 NOTICES
Notices given hereunder shall be deemed to have been duly given on the date
of personal delivery, on the date of facsimile transmittal (provided the
addressor confirms receipt of any facsimile by the addressee), on the day after
delivery by overnight courier or three days after mailing if mailed by certified
or registered mail, return receipt requested, postage prepaid, to the party
being notified at his, her or its address specified on the applicable signature
page or such other address of which the addressee may subsequently notify the
other parties in writing.
10.7 ENTIRE AGREEMENT; AMENDMENTS AND WAIVERS
This Agreement constitutes the entire agreement of the parties with respect
to the subject matter hereof, and neither this Agreement nor any provision
hereof may be waived, modified, amended or terminated except by a written
agreement signed by the Company and holders of 97% of the Common Stock;
provided, however, that any new shareholder of the Company may execute this
Agreement without the consent of the Founders. No waiver of any breach or
default hereunder shall be considered valid unless in writing, and no such
waiver shall be deemed a waiver of any subsequent breach or default of the same
or similar nature.
10.8 GOVERNING LAW; SUCCESSORS AND ASSIGNS
This Agreement shall for all purposes be governed by and construed in
accordance with the laws of the state of Virginia and shall be binding upon the
heirs, personal representatives, executors, administrators, successors and
permitted assigns of the parties. Each of the parties hereto (a) consents to
submit itself to the personal jurisdiction of any federal court located in the
state of Virginia or any Virginia state court if any dispute arises out of this
Agreement or any of the transactions contemplated by this Agreement, (b) agrees
that it will not attempt to deny or defeat such personal jurisdiction by motion
or other request for leave from any such court, and (c) agrees that it will not
bring any action relating to this Agreement or any of the transactions
contemplated by this Agreement in any court other than a federal court sitting
in the state of Virginia or a Virginia state court.
10.9 HEADINGS
The headings of the sections of this Agreement are for convenience of
reference only and shall not affect the interpretation of this Agreement.
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<PAGE> 173
10.10 COUNTERPARTS
This Agreement may be executed in two or more counterparts, each of which
shall constitute an original, but all of which together shall constitute one and
the same instrument.
10.11 SEVERABILITY
If any provision of this Agreement shall be held to be illegal, invalid or
unenforceable, such illegality, invalidity or unenforceability shall attach only
to such provision and shall not in any manner affect or render illegal, invalid
or unenforceable any other provision of this Agreement, and this Agreement shall
be carried out as if any such illegal, invalid or unenforceable provision were
not contained herein.
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<PAGE> 174
IN WITNESS WHEREOF, this Agreement has been executed as of the date and
year first above written.
THE COMPANY:
McCAW INTERNATIONAL (BRAZIL), LTD.
By
-----------------------------------
Its
-------------------------------
Address:
Facsimile number:
THE SHAREHOLDERS:
McCAW INTERNATIONAL, LTD.
By
-----------------------------------
Its
-------------------------------
Address: 1191 Second Avenue, Suite
1600
Seattle, WA 98101
Facsimile number: (206) 749-8384
THE FOUNDERS:
TELCOM VENTURES, LLC
By
-----------------------------------
Its
-------------------------------
Address: Arlington Courthouse Plaza II
2300 Clarendon Boulevard,
Suite 800
Arlington, VA 22201
Facsimile number: (703) 243-4960
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<PAGE> 175
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below approves this Agreement and constitutes and appoints , and ,
duly authorized officers of Telcom Ventures, LLC, and each of them, his, her or
its true and lawful attorney-in-fact and agent, with full power of substitution
and resubstitution, for him, her or it and in his, her or its name, place and
stead, in any and all capacities, to take all actions hereunder, including the
signing of any and all amendments hereto, granting unto said attorneys-in-fact
and agents and each of them full power and authority to do and perform each and
every act and thing requisite or necessary to be done in and about the premises,
as fully to all intents and purposes as he, she or it might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents or any of them, or their or his, her or its substitute or substitutes,
may lawfully do or cause to be done by virtue hereof.
SOUTH BEACH VENTURES INC.
By
------------------------------------
Its
--------------------------------
Address:
Facsimile number:
--------------------------------------
RAJENDRA SINGH
Address:
Facsimile number:
--------------------------------------
NEERA SINGH
Address:
Facsimile number:
THE HERSH RAJ SINGH EDUCATION TRUST
By
------------------------------------
Its
--------------------------------
Address:
Facsimile number:
THE SAMIR RAJ SINGH EDUCATION TRUST
By
------------------------------------
Its
--------------------------------
Address:
Facsimile number:
--------------------------------------
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<PAGE> 176
RAMESH MEHTA
Address:
Facsimile number:
--------------------------------------
VANDANA TANDON
Address:
Facsimile number:
[Include signatures of spouses of
shareholders at date of signing]
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<PAGE> 177
EXHIBIT I
SCHEDULE OF SHAREHOLDERS
<TABLE>
<CAPTION>
SHAREHOLDERS NUMBER OF SHARES OF COMMON STOCK
- --------------------------------------------- ---------------------------------------------
<S> <C>
Shareholder Number of Shares of Common Stock
McCaw International, Ltd 7,317,621 shares of Class A Common Stock
Telcom Ventures, LLC 1,140,000 shares of Class B Common Stock
South Beach Ventures Inc 195,700 shares of Class B Common Stock
Rajendra Singh 95,000 shares of Class B Common Stock
Neera Singh 95,000 shares of Class B Common Stock
The Hersh Raj Singh Education Trust 95,000 shares of Class B Stock
The Samir Raj Singh Education Trust 95,000 shares of Class B Common Stock
Ramesh Mehta 589 shares of Class B Common Stock
Vandana Tandon 190 shares of Class B Common Stock
</TABLE>
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<PAGE> 178
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Set forth below is a description of certain provisions of the Restated
Certificate of Incorporation, (the "Nextel Charter"), of Nextel Communications,
Inc. ("New Nextel," and, together with "Old Nextel," its predecessor corporation
of the same name, "Nextel"), the Amended and Restated By-laws of Nextel (the
"Nextel By-laws") and the Delaware General Corporation Law (the "DGCL"). This
description is intended as a summary only and is qualified in its entirety by
reference to the Nextel Charter, the Nextel By-laws and the DGCL.
Elimination of Liability in Certain Circumstances. The Nextel Charter
provides that, to the full extent provided by law, a director will not be
personally liable to Nextel or its stockholders for or with respect to any acts
or omissions in the performance of his or her duties as a director. The DGCL
provides that a corporation may limit or eliminate a director's personal
liability for monetary damages to the corporation or its stockholders, except
for liability (i) for any breach of the director's duty of loyalty to such
corporation or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) for
paying a dividend or approving a stock repurchase in violation of Section 174 of
the DGCL or (iv) for any transaction from which the director derived an improper
personal benefit.
While Article 7 of the Nextel Charter provides directors with protection
from awards for monetary damages for breaches of the duty of care, it does not
eliminate the directors' duty of care. Accordingly, Article 7 will have no
effect on the availability of equitable remedies such as an injunction or
rescission based on a director's breach of the duty of care. The provisions of
Article 7 as described above apply to officers of Nextel only if they are
directors of Nextel and are acting in their capacity as directors, and does not
apply to officers of Nextel who are not directors.
Indemnification and Insurance. Under the DGCL, directors and officers as
well as other employees and individuals may be indemnified against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement in
connection with specified actions, suits or proceedings, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the corporation as a derivative action) if they acted in good faith and
in a manner they reasonably believed to be in or not opposed to the best
interest of the corporation and, with respect to any criminal action or
proceeding, had no reasonable cause to believe their conduct was unlawful.
Article 6 of the Nextel Charter and Article VII of the Nextel By-laws
provide to directors and officers indemnification to the full extent provided by
law, thereby affording the directors and officers of Nextel the protections
available to directors and officers of Delaware corporations. Article VII of the
Nextel By-laws also provides that expenses incurred by a person in defending a
civil or criminal action, suit or proceeding by reason of the fact that he or
she is or was a director or officer shall be paid in advance of the final
disposition of such action, suit or proceeding upon receipt of an undertaking by
or on behalf of such director or officer to repay such amount if it shall
ultimately be determined that he or she is not entitled to be indemnified by
Nextel as authorized by relevant Delaware law. Nextel has obtained directors and
officers liability insurance providing coverage to its directors and officers.
On September 12, 1991, the Board of Directors of Nextel unanimously adopted
resolutions authorizing Nextel to enter into an Indemnification Agreement (the
"Indemnification Agreement") with each director of Nextel. Nextel has entered
into an Indemnification Agreement with each of the directors other than its two
most recently elected directors, Daniel F. Akerson and Timothy M. Donahue.
One of the purposes of the Indemnification Agreements is to attempt to
specify the extent to which persons entitled to indemnification thereunder (the
"Indemnitees") may receive indemnification under circumstances in which
indemnity would not otherwise be provided by the DGCL. Pursuant to the
Indemnification Agreements, an Indemnitee is entitled to indemnification as
provided by Section 145 of the DGCL and to indemnification for any amount which
the Indemnitee is or becomes legally obligated to pay
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<PAGE> 179
relating to or arising out of any claim made against such person because of any
act, failure to act or neglect or breach of duty, including any actual or
alleged error, misstatement or misleading statement, which such person commits,
suffers, permits or acquiesces in while acting in the Indemnitee's position with
Nextel. The Indemnification Agreements are in addition to and are not intended
to limit any rights of indemnification which are available under the Nextel
Charter or the Nextel By-laws, any policy of insurance or otherwise. Nextel is
not required under the Indemnification Agreements to make payments in excess of
those expressly provided for in the DGCL in connection with any claim against
the Indemnitee:
(i) which results in a final, nonappealable order directing the Indemnitee
to pay a fine or similar governmental imposition which Nextel is
prohibited by applicable law from paying; or
(ii) based upon or attributable to the Indemnitee gaining in fact a
personal profit to which he was not legally entitled including, without
limitation, profits made from the purchase and sale by the Indemnitee of
equity securities of Nextel which are recoverable by Nextel pursuant to
Section 16(b) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") and profits arising from transactions in publicly traded
securities of Nextel which were effected by the Indemnitee in violation
of Section 10(b) of the Exchange Act or Rule 10b-5 promulgated
thereunder.
In addition to the rights to indemnification specified therein, the
Indemnification Agreements are intended to increase the certainty of receipt by
the Indemnitee of the benefits to which he or she is entitled by providing
specific procedures relating to indemnification.
The Indemnification Agreements are also intended to provide increased
assurance of indemnification by prohibiting Nextel from adopting any amendment
to the Nextel Charter or the Nextel By-laws which would have the effect of
denying, diminishing or encumbering the Indemnitee's rights pursuant thereto or
to the DGCL or any other law as applied to any act or failure to act occurring
in whole or in part prior to the effective date of such amendment.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Pursuant to Item 601 of Regulation S-K, 17 C.F.R.
sec.229.601(b)(4)(iii)(A), Nextel has excluded from Exhibit No. 4 instruments
defining the rights of holders of long-term debt with respect to debt that does
not exceed 10% of the total assets of Nextel. Nextel agrees to furnish copies of
such instruments to the Commission upon request.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ------- ---------------------------------------------------------------------------------------
<S> <C>
2.1 -- Agreement and Plan of Merger among Nextel, DCI and WVB dated as of October 28,
1996, as amended.
*2.2 -- Amendment No. 1 to Agreement and Plan of Merger among Nextel, DCI and WVB dated as
of December 19, 1996.
4.1 -- Restated Certificate of Incorporation of Nextel (filed on July 31, 1995 as
Exhibits No. 4.1.1 and 4.1.2 to Nextel's Post-Effective Amendment No. 1 on Form
S-8 to Registration Statement No. 33-91716 on Form S-4 (the "Nextel S-8
Registration Statement") and incorporated herein by reference).
4.2 -- Amended and Restated By-laws of Nextel (filed on July 31, 1995 as Exhibit No. 4.2
to the Nextel S-8 Registration Statement and incorporated herein by reference).
4.3 -- Financing and Security Agreement between Motorola, Inc., Smart SMR of California,
Inc. and Old Nextel, dated as of November 1, 1991 (filed on November 15, 1991 as
Exhibit No. 10.49 to Registration Statement No. 33-43415 on Form S-1 of Old Nextel
filed on October 18, 1991 (the "S-1 Registration Statement") and incorporated
herein by reference).
4.4 -- Financing and Security Agreement between Motorola, Inc., Smart SMR of Illinois,
Inc. and Old Nextel, dated as of November 1, 1991 (filed on November 15, 1991 as
Exhibit No. 10.50 to the S-1 Registration Statement and incorporated herein by
reference).
4.5 -- Financing and Security Agreement between Motorola, Inc., Smart SMR of Texas, Inc.
and Old Nextel, dated as of November 1, 1991 (filed on November 15, 1991 as
Exhibit No. 10.51 to the S-1 Registration Statement and incorporated herein by
reference).
</TABLE>
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<PAGE> 180
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ------- ---------------------------------------------------------------------------------------
<S> <C> <C>
4.6 -- Financing and Security Agreement between Motorola, Inc., Smart SMR of New York,
Inc. and Old Nextel, dated as of November 1, 1991 (filed on November 15, 1991 as
Exhibit No. 10.52 to the S-1 Registration Statement and incorporated herein by
reference).
4.7 -- Financing and Security Agreement between Northern Telcom Finance Corporation,
Smart SMR of California, Inc. and Old Nextel, dated as of November 1, 1991 (filed
on November 15, 1991 as Exhibit No. 10.54 to the S-1 Registration Statement and
incorporated herein by reference).
4.8 -- Financing and Security Agreement between Northern Telcom Finance Corporation,
Smart SMR of Illinois, Inc., and Old Nextel, dated as of November 15, 1991 (filed
on November 15, 1991 as Exhibit No. 10.55 to the S-1 Registration Statement and
incorporated herein by reference).
4.9 -- Financing and Security Agreement between Northern Telcom Finance Corporation,
Smart SMR of Texas, Inc. and Old Nextel, dated as of November 15, 1991 (filed on
November 15, 1991 as Exhibit No. 10.56 to the S-1 Registration Statement and
incorporated herein by reference).
4.10 -- Financing and Security Agreement between Northern Telcom Finance Corporation,
Smart SMR of New York, Inc. and Old Nextel, dated as of November 15, 1991 (filed
on November 15, 1991 as Exhibit No. 10.57 to the S-1 Registration Statement and
incorporated herein by reference).
4.11 -- Amendment No. 2, dated as of August 2, 1994, to Financing and Security Agreements,
dated as of November 1, 1991, by and among Motorola, Smart SMR of California,
Inc., Smart SMR of New York, Inc., Smart SMR of Illinois, Inc., Smart SMR of
Texas, Inc. and Old Nextel (filed as Exhibit 10.01 to the ESMR S-4 Registration
Statement and incorporated herein by reference).
4.12 -- Indenture between Old Nextel and The Bank of New York, as Trustee, dated August
15, 1993 (the "August Indenture") (filed on December 23, 1993 as Exhibit No. 4.13
to the Registration Statement on Form S-4 of the Company, No. 33-73388 (the
"PowerFone S-4 Registration Statement") and incorporated herein by reference).
4.13 -- Form of Note issued pursuant to the August Indenture (included in Exhibit No.
4.12).
4.14 -- Indenture between Old Nextel and The Bank of New York, as Trustee, dated as of
February 15, 1994 (the "February Indenture") (filed on March 1, 1994 as Exhibit
No. 4.1 to the Form 8-K Current Report of Old Nextel dated February 16, 1994 and
incorporated herein by reference).
4.15 -- Form of Note issued pursuant to the February Indenture (included in Exhibit No.
4.14).
4.16 -- Supplemental Indenture, dated as of June 30, 1995 to the August Indenture between
Old Nextel and The Bank of New York (filed on November 14, 1995 as Exhibit 4.1 to
the Quarterly Report on Form 10-Q of Nextel for the quarter ended September 30,
1995 and incorporated herein by reference).
4.17 -- Supplemental Indenture, dated as of June 30, 1995 to the February Indenture
between Old Nextel and The Bank of New York (filed on November 14, 1995 as Exhibit
4.2 to the Quarterly Report on Form 10-Q of Nextel for the quarter ended September
30, 1995 and incorporated herein by reference).
4.18 -- Second Supplemental Indenture, dated as of July 28, 1995 between ESMR (now known
as Nextel), as Successor by Merger to Old Nextel and The Bank of New York
(relating to the August Indenture) (filed on November 14, 1995 as Exhibit 4.3 to
the Quarterly Report on Form 10-Q of Nextel for the quarter ended September 30,
1995 and incorporated herein by reference).
4.19 -- Second Supplemental Indenture, dated as of July 28, 1995 between ESMR (now known
as Nextel), as Successor by Merger to Old Nextel and The Bank of New York
(relating to the February Indenture) (filed on November 14, 1995 as Exhibit 4.4 to
the Quarterly Report on Form 10-Q of Nextel for the quarter ended September 30,
1995 and incorporated herein by reference).
4.20 -- Indenture for Senior Redeemable Discount Notes due 2004, dated as of January 13,
1994, between OneComm (formerly called CenCall Communications Corp.) and The Bank
of New York (the "OneComm Indenture") (filed on June 7, 1995 as Exhibit No. 99.2
to Old Nextel's Registration Statement No. 33-93182 on Form S-4 (the "OneComm S-4
Registration Statement") and incorporated herein by reference).
4.21 -- Form of Note issued pursuant to the OneComm Indenture (included in Exhibit 4.20).
</TABLE>
II-3
<PAGE> 181
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ------- ---------------------------------------------------------------------------------------
<S> <C> <C>
4.22 -- Supplemental Indenture dated as of June 30, 1995 to the OneComm Indenture between
OneComm (formerly called CenCall Communications Corp.) and The Bank of New York
(filed on November 14, 1995 as Exhibit 10.12 to the Form 10-Q for the quarter
ended September 30, 1995 and incorporated herein by reference).
4.23 -- Second Supplemental Indenture dated as of July 28, 1995 between Nextel (formerly
known as ESMR, Inc.), as successor to OneComm, and The Bank of New York (relating
to the OneComm Indenture) (filed on November 14, 1995 as Exhibit 10.13 to the Form
10-Q for the quarter ended September 30, 1995 and incorporated herein by
reference).
4.24 -- Indenture for Senior Redeemable Discount Notes due 2004, dated as of April 25,
1994, between Dial Call and The Bank of New York (the "2004 Indenture") (filed on
June 7, 1995 as Exhibit 99.4 to the OneComm S-4 Registration Statement and
incorporated herein by reference).
4.25 -- Supplemental Indenture, dated as of August 7, 1995, to the 2004 Indenture between
Dial Call and The Bank of New York (filed on December 5, 1995 as Exhibit 99.3 to
Nextel's Registration Statement No. 33-80021 on Form S-4 (the "Dial Page S-4
Registration Statement") and incorporated herein by reference).
4.26 -- Second Supplemental Indenture, dated as of January 30, 1996, to the 2004 Indenture
between Dial Page (as successor to Dial Call) and The Bank of New York (filed on
April 1, 1996 as Exhibit 4.26 to the Annual Report on Form 10-K of Nextel for the
year ended December 31, 1995 (the "1995 Form 10-K") and incorporated herein by
reference).
4.27 -- Third Supplemental Indenture, dated as of January 30, 1996, to the 2004 Indenture
between Nextel (as successor to Dial Page) and The Bank of New York (filed on
April 1, 1996 as Exhibit 4.27 to the 1995 Form 10-K and incorporated herein by
reference).
4.28 -- Indenture for Senior Discount Notes due 2005, dated as of December 22, 1993,
between Dial Call and The Bank of New York (the "2005 Indenture") (filed as
Exhibit 99.3 to the OneComm S-4 Registration Statement and incorporated herein by
reference).
4.29 -- Supplemental Indenture, dated as of April 15, 1994, to the 2005 Indenture between
Dial Call and The Bank of New York (filed on April 1, 1996 as Exhibit 4.29 to the
1995 Form 10-K and incorporated herein by reference).
4.30 -- Supplemental Indenture, dated as of June 30, 1995, to the 2005 Indenture between
Dial Call and The Bank of New York (filed on December 5, 1995 as Exhibit 99.4 to
the Dial Page S-4 Registration Statement and incorporated herein by reference).
4.31 -- Third Supplemental Indenture, dated as of January 30, 1996, to the 2005 Indenture
between Dial Page (as successor to Dial Call) and The Bank of New York (filed on
April 1, 1996 as Exhibit 4.31 to the 1995 Form 10-K and incorporated herein by
reference).
4.32 -- Fourth Supplemental Indenture, dated as of January 30, 1996, to the 2005 Indenture
between Nextel (as successor to Dial Page) and The Bank of New York (filed on
April 1, 1996 as Exhibit 4.32 to the 1995 Form 10-K and incorporated herein by
reference).
4.33 -- Registration Rights Agreement dated as of August 23, 1996 by and among Nextel,
Grupo Communicaciones, San Luis, S.A. de C.V. and each of the persons listed on
Schedule 1 thereto (filed as Exhibit 4.33 to Nextel's Registration Statement No.
333-11733 on Form S-3 and incorporated herein by reference).
</TABLE>
II-4
<PAGE> 182
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ------- ---------------------------------------------------------------------------------------
<S> <C> <C>
4.34 -- Form of Shareholders Agreement between the holder of the New Class A Common Stock
and the holders of the New Class B Common Stock.
*5 -- Opinion of Jones, Day, Reavis & Pogue re: validity.
*8 -- Opinion of Dewey Ballantine re: tax matters.
*23.1 -- Consent of Jones, Day, Reavis & Pogue (included in Exhibit 5).
*23.2 -- Consent of Dewey Ballantine (included in Exhibit 8).
*23.3 -- Consents of Deloitte & Touche LLP.
*23.4 -- Consent of KPMG Peat Marwick LLP.
*23.5 -- Consent of KPMG Peat Marwick LLP.
24 -- Powers of Attorney.
</TABLE>
- ---------------
* Filed herewith. All other exhibits have been previously filed or incorporated
by reference.
(b) Financial Statement Schedules
Not applicable.
(c) Not applicable.
ITEM 22. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(1) That, for purposes of determining any liability under the Securities
Act of 1933, each filing of the registrant's annual report pursuant to Section
13(a) or 15(d) of the Securities Exchange Act of 1934 (and, where applicable,
each filing of an employee benefit plan's annual report pursuant to Section
15(d) of the Securities Exchange Act of 1934) that is incorporated by reference
in the registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(2) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
(3) To respond to requests for information that is incorporated by
reference into the prospectus pursuant to Items 4, 10(b), 11, or 13 of this
Form, within one business day of receipt of such request, and to send the
incorporated documents by first class mail or other equally prompt means. This
includes information contained in documents filed subsequent to the effective
date of the registration statement through the date of responding to the
request.
(4) To supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein, that
was not the subject of and included in the registration statement when it became
effective.
II-5
<PAGE> 183
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this amendment to its registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of McLean, in
the Commonwealth of Virginia, on December 20, 1996.
NEXTEL COMMUNICATIONS, INC.
By: THOMAS J. SIDMAN
------------------------------------
THOMAS J. SIDMAN
VICE PRESIDENT AND GENERAL COUNSEL
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed below by the following persons in the
capacities indicated on December 20, 1996:
<TABLE>
<CAPTION>
NAME TITLE
- --------------------------------------------- --------------------------------------------
<S> <C>
* Chairman of the Board, Chief Executive
- --------------------------------------------- Officer and Director (Principal Executive
DANIEL F. AKERSON Officer)
* Senior Vice President and Chief Financial
- --------------------------------------------- Officer (Principal Financial Officer)
STEVEN M. SHINDLER
* Vice President and Corporate Controller
- --------------------------------------------- (Principal Accounting Officer)
STEPHEN M. BAILOR
* Vice Chairman of the Board and Director
- ---------------------------------------------
BRIAN D. MCAULEY
* Vice Chairman of the Board and Director
- ---------------------------------------------
MORGAN E. O'BRIEN
* President, Chief Operating Officer and
- --------------------------------------------- Director
TIMOTHY M. DONAHUE
Director
- ---------------------------------------------
KEITH J. BANE
Director
- ---------------------------------------------
ROBERT COOPER
Director
- ---------------------------------------------
CRAIG O. MCCAW
Director
- ---------------------------------------------
KEISUKE NAKASAKI
* Director
- ---------------------------------------------
MASAAKI TORIMOTO
* Director
- ---------------------------------------------
DENNIS M. WEIBLING
/s/ THOMAS J. SIDMAN
- ---------------------------------------------
*THOMAS J. SIDMAN
(ATTORNEY-IN-FACT)
</TABLE>
II-6
<PAGE> 184
EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ------- ---------------------------------------------------------------------------------------
<S> <C> <C>
2.1 -- Agreement and Plan of Merger among Nextel, DCI and WVB dated as of October 28,
1996, as amended.
*2.2 -- Amendment No. 1 to Agreement and Plan of Merger among Nextel, DCI and WVB dated
December 19, 1996.
4.1 -- Restated Certificate of Incorporation of Nextel (filed on July 31, 1995 as
Exhibits No. 4.1.1 and 4.1.2 to Nextel's Post-Effective Amendment No. 1 on Form
S-8 to Registration Statement No. 33-91716 on Form S-4 (the "Nextel S-8
Registration Statement") and incorporated herein by reference).
4.2 -- Amended and Restated By-laws of Nextel (filed on July 31, 1995 as Exhibit 4.2 to
the Nextel S-8 Registration Statement and incorporated herein by reference).
4.3 -- Financing and Security Agreement between Motorola, Inc., Smart SMR of California,
Inc. and Old Nextel, dated as of November 1, 1991 (filed on November 15, 1991 as
Exhibit No. 10.49 to Registration Statement No. 33-43415 on Form S-1 of Old Nextel
(the "S-1 Registration Statement") and incorporated herein by reference).
4.4 -- Financing and Security Agreement between Motorola, Inc., Smart SMR of Illinois,
Inc. and Old Nextel, dated as of November 1, 1991 (filed on November 15, 1991 as
Exhibit No. 10.50 to the S-1 Registration Statement and incorporated herein by
reference).
4.5 -- Financing and Security Agreement between Motorola, Inc., Smart SMR of Texas, Inc.
and Old Nextel, dated as of November 1, 1991 (filed on November 15, 1991 as
Exhibit No. 10.51 to the S-1 Registration Statement and incorporated herein by
reference).
4.6 -- Financing and Security Agreement between Motorola, Inc., Smart SMR of New York,
Inc. and Old Nextel, dated as of November 1, 1991 (filed on November 15, 1991 as
Exhibit No. 10.52 to the S-1 Registration Statement and incorporated herein by
reference).
4.7 -- Financing and Security Agreement between Northern Telcom Finance Corporation,
Smart SMR of California, Inc. and Old Nextel, dated as of November 1, 1991 (filed
on November 15, 1991 as Exhibit No. 10.54 to the S-1 Registration Statement and
incorporated herein by reference).
4.8 -- Financing and Security Agreement between Northern Telcom Finance Corporation,
Smart SMR of Illinois, Inc., and Old Nextel, dated as of November 15, 1991 (filed
on November 15, 1991 as Exhibit No. 10.55 to the S-1 Registration Statement and
incorporated herein by reference).
4.9 -- Financing and Security Agreement between Northern Telcom Finance Corporation,
Smart SMR of Texas, Inc. and Old Nextel, dated as of November 15, 1991 (filed on
November 15, 1991 as Exhibit No. 10.56 to the S-1 Registration Statement and
incorporated herein by reference).
4.10 -- Financing and Security Agreement between Northern Telcom Finance Corporation,
Smart SMR of New York, Inc. and Old Nextel, dated as of November 15, 1991 (filed
on November 15, 1991 as Exhibit No. 10.57 to the S-1 Registration Statement and
incorporated herein by reference).
4.11 -- Amendment No. 2, dated as of August 2, 1994, to Financing and Security Agreements,
dated as of November 1, 1991, by and among Motorola, Smart SMR of California,
Inc., Smart SMR of New York, Inc., Smart SMR of Illinois, Inc., Smart SMR of
Texas, Inc. and Old Nextel (filed as Exhibit 10.01 to the ESMR S-4 Registration
Statement and incorporated herein by reference).
4.12 -- Indenture between Old Nextel and The Bank of New York, as Trustee, dated August
15, 1993 (the "August Indenture") (filed on December 23, 1993 as Exhibit No. 4.13
to the Registration Statement on Form S-4 of the Company, No. 33-73388 (the
"PowerFone S-4 Registration Statement") and incorporated herein by reference).
4.13 -- Form of Note issued pursuant to the August Indenture (included in Exhibit No.
4.12).
4.14 -- Indenture between Old Nextel and The Bank of New York, as Trustee, dated as of
February 15, 1994 (the "February Indenture") (filed on March 1, 1994 as Exhibit
No. 4.1 to the Form 8-K of Old Nextel dated February 16, 1994 and incorporated
herein by reference).
4.15 -- Form of Note issued pursuant to the February Indenture (included in Exhibit No.
4.14).
</TABLE>
<PAGE> 185
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ------- ---------------------------------------------------------------------------------------
<S> <C> <C>
4.16 -- Supplemental Indenture, dated as of June 30, 1995 to the August Indenture between
Old Nextel and The Bank of New York (filed on November 14, 1995 as Exhibit 4.1 to
the Quarterly Report on Form 10-Q of Nextel for the quarter ended September 30,
1995 and incorporated herein by reference).
4.17 -- Supplemental Indenture, dated as of June 30, 1995 to the February Indenture
between Old Nextel and The Bank of New York (filed on November 14, 1995 as Exhibit
4.2 to the Quarterly Report on Form 10-Q of Nextel for the quarter ended September
30, 1995 and incorporated herein by reference).
4.18 -- Second Supplemental Indenture, dated as of July 28, 1995 between ESMR (now known
as Nextel), as Successor by Merger to Old Nextel and The Bank of New York
(relating to the August Indenture) (filed on November 14, 1995 as Exhibit 4.3 to
the Quarterly Report on Form 10-Q of Nextel for the quarter ended September 30,
1995 and incorporated herein by reference).
4.19 -- Second Supplemental Indenture, dated as of July 28, 1995 between ESMR (now known
as Nextel), as Successor by Merger to Old Nextel and The Bank of New York
(relating to the February Indenture) (filed on November 14, 1995 as Exhibit 4.4 to
the Quarterly Report on Form 10-Q of Nextel for the quarter ended September 30,
1995 and incorporated herein by reference).
4.20 -- Indenture for Senior Redeemable Discount Notes due 2004, dated as of January 13,
1994, between OneComm (formerly called CenCall Communications Corp.) and The Bank
of New York (the "OneComm Indenture") (filed on June 7, 1995 as Exhibit No. 99.2
to Old Nextel's Registration Statement No. 33-93182 on Form S-4 (the "OneComm S-4
Registration Statement") and incorporated herein by reference).
4.21 -- Form of Note issued pursuant to the OneComm Indenture (included in Exhibit 4.20).
4.22 -- Supplemental Indenture dated as of June 30, 1995 to the OneComm Indenture between
OneComm (formerly called CenCall Communications Corp.) and The Bank of New York
(filed on November 14, 1995 as Exhibit 10.12 to the Form 10-Q for the quarter
ended September 30, 1995 and incorporated herein by reference).
4.23 -- Second Supplemental Indenture dated as of July 28, 1995 between Nextel (formerly
known as ESMR, Inc.), as successor to OneComm, and The Bank of New York (relating
to the OneComm Indenture) (filed on November 14, 1995 as Exhibit 10.13 to the Form
10-Q for the quarter ended September 30, 1995 and incorporated herein by
reference).
4.24 -- Indenture for Senior Redeemable Discount Notes due 2004, dated as of April 25,
1994, between Dial Call and The Bank of New York (the "2004 Indenture") (filed on
June 7, 1995 as Exhibit 99.4 to the OneComm S-4 Registration Statement and
incorporated herein by reference).
4.25 -- Supplemental Indenture, dated as of August 7, 1995, to the 2004 Indenture between
Dial Call and The Bank of New York (filed on December 5, 1995 as Exhibit 99.3 to
Nextel's Registration Statement No. 33-80021 on Form S-4 (the "Dial Page S-4
Registration Statement") and incorporated herein by reference).
4.26 -- Second Supplemental Indenture, dated as of January 30, 1996, to the 2004 Indenture
between Dial Page (as successor to Dial Call) and The Bank of New York (filed on
April 1, 1996 as Exhibit 4.26 to the Annual Report on Form 10-K of Nextel for the
year ended December 31, 1995 (the "1995 Form 10-K") and incorporated herein by
reference).
4.27 -- Third Supplemental Indenture, dated as of January 30, 1996, to the 2004 Indenture
between Nextel (as successor to Dial Page) and The Bank of New York (filed on
April 1, 1996 as Exhibit 4.27 to the 1995 Form 10-K and incorporated herein by
reference).
4.28 -- Indenture for Senior Discount Notes due 2005, dated as of December 22, 1993,
between Dial Call and The Bank of New York (the "2005 Indenture") (filed as
Exhibit 99.3 to the OneComm S-4 Registration Statement and incorporated herein by
reference).
</TABLE>
<PAGE> 186
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ------- ---------------------------------------------------------------------------------------
<S> <C> <C>
4.29 -- Supplemental Indenture, dated as of April 15, 1994, to the 2005 Indenture between
Dial Call and The Bank of New York (filed on April 1, 1996 as Exhibit 4.29 to the
1995 Form 10-K and incorporated herein by reference).
4.30 -- Supplemental Indenture, dated as of June 30, 1995, to the 2005 Indenture between
Dial Call and The Bank of New York (filed on December 5, 1995 as Exhibit 99.4 to
the Dial Page S-4 Registration Statement and incorporated herein by reference).
4.31 -- Third Supplemental Indenture, dated as of January 30, 1996, to the 2005 Indenture
between Dial Page (as successor to Dial Call) and The Bank of New York (filed on
April 1, 1996 as Exhibit 4.31 to the 1995 Form 10-K and incorporated herein by
reference).
4.32 -- Fourth Supplemental Indenture, dated as of January 30, 1996, to the 2005 Indenture
between Nextel (as successor to Dial Page) and The Bank of New York (filed on
April 1, 1996 as Exhibit 4.32 to the 1995 Form 10-K and incorporated herein by
reference).
4.33 -- Registration Rights Agreement dated as of August 23, 1996 by and among Nextel,
Grupo Communicaciones, San Luis, S.A. de C.V. and each of the persons listed on
Schedule 1 thereto (filed as Exhibit 4.33 to Nextel's Registration Statement No.
333-11733 on Form S-3 and incorporated herein by reference).
4.34 -- Form of Shareholders Agreement between the holder of the New Class A Common Stock
and the holders of the New Class B Common Stock.
*5 -- Opinion of Jones, Day, Reavis & Pogue re: validity of shares.
*8 -- Opinion of Dewey Ballantine re: tax matters.
*23.1 -- Consent of Jones, Day, Reavis & Pogue (included in Exhibit 5).
*23.2 -- Consent of Dewey Ballantine (included in Exhibit 8).
*23.3 -- Consents of Deloitte & Touche LLP.
*23.4 -- Consent of KPMG Peat Marwick LLP.
*23.5 -- Consent of KPMG Peat Marwick LLP.
24 -- Powers of Attorney.
</TABLE>
- ---------------
* Filed herewith. All other exhibits have been filed previously or incorporated
by reference.
<PAGE> 1
EXHIBIT 2.2
AMENDMENT NO. 1 TO AGREEMENT AND PLAN OF MERGER
AMENDMENT NO. 1 dated as of December 19, 1996, to AGREEMENT AND PLAN OF
MERGER by and among NEXTEL COMMUNICATIONS, INC., a Delaware corporation
("Nextel"), DIAL CALL INDIMICH, INC., a Delaware corporation and direct
wholly-owned subsidiary of Nextel ("Indimich"), and WIRELESS VENTURES OF BRAZIL,
INC., a Virginia corporation ("WVB"), dated as of October 28, 1996 (the
"Agreement").
RECITALS
A. Nextel, Indimich and WVB are parties to the Agreement.
B. Nextel, Indimich and WVB desire to amend certain provisions of the
Agreement pursuant to Section 11.2 of the Agreement.
In consideration of the mutual promises contained herein, the parties
hereto agree as follows:
ARTICLE I.
AMENDMENTS
1.1 DEFINED TERMS
Except where otherwise provided, terms defined in the Agreement are used
herein as therein defined.
1.2 AMENDMENTS
(a) Section 2.2.1(b) of the Agreement is hereby amended and restated to
read in its entirety as follows:
(b) The shares of common stock of Indimich issued and outstanding at the
Effective Time shall be converted into the number of shares of Class A
Common Stock of the Surviving Corporation which equals 81% of the total
number of shares of WVB Common Stock outstanding immediately following
the Effective Time.
(b) Section 10.1(b) of the Agreement is hereby amended and restated to read
in its entirety as follows:
(b) by either Nextel or WVB if the transactions contemplated hereby
shall not have been consummated by January 29, 1997; provided, however,
that the right to terminate this Agreement under this Section 10.1(b)
shall not be available to any party whose failure to fulfill any
obligation under this Agreement has been the cause of or resulted in the
failure of the transactions contemplated hereby to occur on or before
such date; or
(c) The Agreement is amended to add the following Section 5.18:
5.18 WVB Optionholder Waivers
Prior to the Closing Date, WVB agrees to use its best efforts: (i) to
obtain from each of the WVB Optionholders either (a) a waiver,
substantially in the form attached hereto as Exhibit 5.18, or (b) a
written agreement (in a form reasonably satisfactory to Nextel) (x)
regarding the exercise price and number of shares of WVB Class A Common
Stock and WVB Class B Common Stock issuable in respect of the WVB Option
held by such WVB Optionholder as a result of the Recapitalization of
WVB; or (y) cancelling the WVB Option without liability or cost to WVB.
1
<PAGE> 2
(d) The Agreement is amended to add the following Section 5.19:
5.19 Transfer of Shares to McCaw International, Ltd.
Immediately following completion of the Merger, Nextel, subject to the
proviso to Section 4.9(f), shall transfer to McCaw International, Ltd.,
a Washington corporation and an indirect wholly-owned subsidiary of
Nextel, all shares of Class A Common Stock of the Surviving Corporation
into which the shares of common stock of Indimich have been converted in
the Merger.
(e) The Agreement is amended to add the following Section 5.20:
5.20 STRYPES Transaction:
(a) Subject to the provisions set forth in clause (b) below (and to
Nextel's receipt of a written agreement, in form reasonably acceptable
to Nextel, signed by each of the Participants (as defined in clause (b)
below) and implementing the arrangements outlined in clause (b) below),
at the request of Telcom, Nextel shall provide reasonable assistance to
the WVB Shareholders (including, if and to the extent required by the
SEC, the preparation and filing of a registration statement (containing
a resale prospectus) covering the resale of the shares of Nextel Common
Stock issued to such WVB Shareholders in the Merger) in connection with
the proposed public offering, by or for the benefit of such WVB
Shareholders, to investors of securities to be issued by a trust in a
"STRYPES" or similar trust-type transaction (the "Trust Offering"). Such
assistance shall include the execution and delivery by Nextel of an
appropriate agreement with the WVB Shareholders and the underwriters of
such Trust Offering, which shall contain representations and warranties
by Nextel and the other parties to such agreement reasonably appropriate
in view of the role of such parties in such Trust Offering and otherwise
customary for secondary offerings of such type involving selling
shareholders who are not affiliates of Nextel and pursuant to which
Nextel shall arrange for the provision of an appropriate opinion of
counsel and accountants' comfort letters in standard form, provided that
the indemnification obligations of Nextel and the WVB Shareholders to
the underwriters pursuant to such agreement shall reflect the
arrangements agreed to and summarized in clause (b)(i) below. In
addition, Nextel shall afford the WVB shareholders, the underwriters of
such Trust Offering and their respective legal representatives access to
such information concerning Nextel, and to appropriate Nextel personnel,
as Nextel, such WVB Shareholders and such underwriters shall reasonably
determine to be advisable in the circumstances or as may be legally
required to enable such parties to fulfill their obligations under the
federal securities laws in connection with such Trust Offering, and
Nextel also shall cause at least one senior executive of Nextel to
participate in the "road show" for such Trust Offering.
(b) In consideration of the actions and commitments by Nextel set forth
above, Telcom and the other WVB Shareholders participating in such Trust
Offering (the "Participants") shall : (i) jointly and severally
indemnify Nextel in full against any and all losses, costs and
liabilities incurred by Nextel, its officers, directors, attorneys,
agents or controlled affiliates or any of them (the "Indemnified Group")
that arises from or is connected with any claim, action or proceeding
brought against or involving any member of the Indemnified Group by any
purchaser or underwriter (or any person claiming or asserting a claim by
or through any such purchaser or underwriter) of such Trust Offering;
provided that the Participants shall not be obligated hereby to
indemnify any member of the Indemnified Group against any losses, costs
or liabilities to the extent the same are determined by an Adjudication
(as defined in clause (c) below) to arise from one or more materially
false or misleading statements or omissions contained (or incorporated
by reference) in the resale prospectus or the related registration
statement prepared and filed by Nextel, in the form declared effective
(other than any of such information as was supplied (or was legally
required to be supplied) by any of such WVB Shareholders or the
underwriters for inclusion in such prospectus or registration
statement), or included in other written materials prepared by Nextel or
at Nextel's direction and were specifically authorized in writing by
Nextel to be employed as part of the offering materials related to the
Trust Offering (it being specifically understood and agreed that the
indemnification obligations of the Participants hereunder, and the
amount of any related payments due by them to
2
<PAGE> 3
any and all members of the Indemnified Group, shall be determined as
provided in clause (c) below) (any such claim, action or proceeding for
which such indemnification may be sought, after giving effect to the
exclusions set forth in the foregoing proviso, being referred to as an
"Indemnifiable Action"); (ii) pay to Nextel the amount of any payment
Nextel in turn would be required to make to the carriers providing its
Directors and Officers' insurance coverage to reinstate a dollar amount
of insurance coverage, up to the maximum amount of coverage initially in
force under the applicable policies during the current coverage period,
to the extent such coverage is reduced by any payments made to or claims
filed by or for the benefit of any member of the Indemnified Group in
respect of an Indemnifiable Action; (iii) pay Nextel for all excess
premium amounts that Nextel in turn would be required to pay to secure
an extension of its Directors and Officers' insurance coverage and
related policies of insurance at the expiration of the current coverage
period (with such extension coverage being in all material respects,
including term, deductibles, co-pays and allocations, limits and
exclusions, substantially identical to the coverage currently in force)
as a result of any payments made to or claims filed by or for the
benefit of any member of the Indemnified Group in respect of an
Indemnifiable Action (with the amount of such excess premiums being
agreed to be the difference between the total amount of the premiums
quoted as due to the relevant carriers for the extension coverage and
the total amount of the premiums for which such carriers would issue
identical replacement coverage if they were allowed to fully exclude
coverage for (and receive full reimbursement for (including reasonable
interest charges on) all amounts previously expended by them in respect
of) all Indemnifiable Actions under any policy issued or to be issued by
them to Nextel); and (iv) pay Nextel in full (up to an aggregate limit
amount of $250,000) for the actual, documented out-of-pocket costs
incurred by Nextel in connection with its provision of assistance
relating to the Trust Offering as contemplated above, including the
reasonable fees and expenses of Nextel's outside counsel and accountants
and expenses incurred by officers and employees of Nextel (including
travel expenses associated with participation in the "road show" for the
Trust Offering); it being expressly understood and agreed that excluded
from such amounts shall be (A) any and all payments made in respect of
salaries, employee benefits, employment taxes or similar normal
personnel overhead charges associated with the time Nextel's employees
may devote to tasks related to the Trust Offering, which shall be the
sole and exclusive responsibility of Nextel, and (B) any and all
registration, blue sky and similar fees, all financial printers costs
and all underwriters' expenses, commissions, discounts and similar fees,
which shall be the sole and exclusive responsibility of the
Participants.
(c) In the event of an Indemnifiable Action, the procedures set forth in
Section 9.3 herein shall control, with the Participants being the
Indemnifying Party and the members of the Indemnified Group being the
Indemnitee; provided that the $500,000 deductible and the liability
limitation provisions of Section 9.1 shall not be applicable, and
payments made by any Participants in respect of an Indemnifiable Action
shall be made only in cash and shall be excluded from the calculations
of such participant's maximum liability limitation, if any, for purposes
of Section 9.1. Nextel will act reasonably and in good faith in seeking
to obtain the maximum benefits of any Directors and Officers' insurance
coverage that may be available in respect of an Indemnifiable Action,
and in negotiating with the relevant insurance carrier(s) regarding the
appropriate deductible and allocation arrangements that may apply to
such Indemnifiable Action for purposes of such insurance coverage, and
the Participants' indemnification obligations as to an Indemnifiable
Action under clause (b)(i) above shall take into account all payments
and reimbursements to Nextel pursuant to such insurance coverage.
Subject to Nextel's obligations to act reasonably and in good faith as
provided in the preceding sentence, the Participants shall not contest
the results achieved by Nextel in respect of Directors' and Officers'
insurance coverage, including the amount of any applicable deductible
and/or the allocation arrangements, applicable to such Indemnifiable
Action. The term "Adjudication" shall mean, as to an Indemnifiable
Action that is resolved, whether on jurisdictional grounds or on its
merits by a court of competent jurisdiction, a final, non-appealable
judgment and as to an Indemnifiable Action that is settled or otherwise
disposed of prior to such a final, non-appealable judgment, a final and
binding arbitration award or any other outcome mutually agreed to
3
<PAGE> 4
by Telcom and Nextel. Subject to Section 9.3, the Indemnifying Party
shall control the defense of the Indemnifiable Action, provided that the
Indemnified Group may assume control of the Indemnifiable Action if (i)
the Indemnified Group shall have proposed a settlement of the
Indemnifiable Action that the Indemnifying Party opposes and the
Indemnifying Party shall not, upon request, demonstrate to the
reasonable satisfaction of the Indemnified Group (including, if
requested, the posting of a bond or other security) that the
Indemnifying Party has the financial resources to meet its indemnifying
obligations hereunder or (ii) the Indemnifying Group shall assume
responsibility for the Indemnifiable Action. If the Indemnifying Party
should dispute its indemnification obligations on the grounds that the
matter at issue does not constitute an Indemnifiable Action, then the
Indemnifying Party promptly shall submit the matter at issue to a
process of binding arbitration, to be conducted in accordance with the
rules of the American Arbitration Association applicable to commercial
disputes (with such arbitration to be held in Washington, D.C.) by three
arbitrators mutually acceptable to Nextel and Telcom, and such
arbitrators shall determine if such matter constitutes an Indemnifiable
Action and, if so, the amount of the payment required to be made by the
Indemnifying Party to the Indemnity. The parties will use their
respective reasonable best efforts to assure that any such arbitration
is commenced and concluded as promptly as possible, shall bear their own
costs associated with the arbitration (including one half of the
arbitrators' fees and expenses allocated to each party), unless the
arbitrators' final award recommends a different treatment of such costs,
and agree that such arbitrators' award shall be final, binding and
non-appealable, and that judgment on such award may be had in any court
having jurisdiction of the relevant parties.
(f) The Agreement is amended to add the following Section 6.19:
6.19 WVB Optionholders
WVB shall have obtained from each WVB Optionholder either the waivers or
the agreements, as contemplated by Section 5.18, unless the Indemnifying
Founders shall have entered into an agreement in a form reasonably
satisfactory to Nextel agreeing to fully indemnify the Surviving
Corporation and Nextel for any damages and costs incurred by Nextel or
the Surviving Corporation with respect to any claims in respect of the
WVB Options.
(g) Section 9.4 of the Agreement is amended and restated to read in its
entirety as follows:
9.4 Survival
The covenants, agreements, representations and warranties made by the
parties in or pursuant to this Agreement shall survive the Closing for
18 months, except as otherwise set forth herein, and except that (a)
indemnification pursuant to Article IX relating to the representations
and warranties contained in Section 3.11 and 4.9 and indemnification
pursuant to Section 5.20 shall survive until expiration of the statute
of limitations applicable to the matters covered thereby (giving effect
to any waiver, mitigation or extension thereof), if later, and (b) the
agreements contained in this Article IX shall survive indefinitely. Any
claim for indemnification asserted in accordance with the provisions of
this Agreement prior to the relevant expiration date shall survive until
it is resolved.
ARTICLE II.
GENERAL
2.1 HEADINGS
The headings preceding the text of Sections of this Amendment are for
convenience only and shall not be deemed parts thereof.
4
<PAGE> 5
2.2 BINDING EFFECT; APPLICABLE LAW
This Amendment shall become effective when it shall have been executed by
Nextel, Indimich and WVB. This Amendment shall be governed by and construed and
enforced in accordance with the laws of the State of Delaware, as applied to
contracts executed and to be fully performed in such state.
2.3 COUNTERPARTS
This Amendment may be executed simultaneously in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have entered into and signed this
Amendment as of the date and year first above written.
NEXTEL COMMUNICATIONS, INC.
By THOMAS J. SIDMAN
------------------------
Its Vice President and General Counsel
----------------------------------
DIAL CALL INDIMICH, INC.
By THOMAS J. SIDMAN
-------------------------
Its Vice President and General Counsel
----------------------------------
WIRELESS VENTURES OF BRAZIL, INC.
By HAL B. PERKINS
-------------------------
Its Assistant Secretary and General Counsel
---------------------------------------
5
<PAGE> 1
EXHIBIT 5
JONES, DAY, REAVIS & POGUE
3500 ONE PEACHTREE CENTER
303 PEACHTREE STREET
ATLANTA, GA 30308
December 20, 1996
Nextel Communications, Inc.
1505 Farm Credit Drive
McLean, Virginia 22102
Gentlemen:
We have acted as counsel to Nextel Communications, Inc., a Delaware
corporation (the "Company"), in connection with the registration of 11,963,877
shares of Common Stock, $.001 par value per share, of the Company (the
"Shares"), to be issued by the Company pursuant to a Registration Statement on
Form S-4 (File No. 333-17173) (the "Registration Statement"), filed with the
Securities and Exchange Commission to which this opinion appears as Exhibit 5.
We have examined originals or certified or photostatic copies of such
records of the Company, certificates of officers of the Company, and public
officials and such other documents as we have deemed relevant or necessary as
the basis of the opinion set forth below in this letter. In such examination, we
have assumed the genuineness of all signatures, the conformity to original
documents submitted as certified or photostatic copies, and the authenticity of
originals of such latter documents. Based on the foregoing, we are of the
following opinion:
The Shares have been duly authorized and, when issued, will be
validly issued, fully paid and nonassessable.
We hereby consent to the filing of this opinion as Exhibit 5 to the
Registration Statement and the reference to this Firm under the heading "Certain
Legal Matters" in the Prospectus constituting part of the Registration
Statement.
Sincerely,
/s/ JONES, DAY, REAVIS & POGUE
JONES, DAY, REAVIS & POGUE
<PAGE> 1
EXHIBIT 8
DEWEY BALLANTINE
1775 Pennsylvania Avenue N.W.
Washington, D.C. 20006-4405
Telephone (202) 362-1000
Facsimile (202) 362-1093
December 19, 1996
Telcom Ventures, L.L.C.
Arlington Courthouse Plaza II
2300 Clarendon Boulevard, Suite 800
Arlington, VA 22201
Re: Wireless Ventures of Brazil, Inc.
Ladies and Gentlemen:
We have acted as counsel to Wireless Ventures of Brazil, Inc. ("WVB") in
connection with the Registration Statement on Form S-4 of Nextel Communications,
Inc. ("Nextel"), which includes the Proxy Statement of WVB and which was filed
initially with the Securities and Exchange Commission (the "SEC") on December 3,
1996 (the "Proxy Statement/Prospectus"). The Proxy Statement/Prospectus is being
furnished to the holders of common stock of WVB for use at the special meeting
of the shareholders of WVB to consider a proposal to recapitalize WVB and to
approve the Agreement and Plan of Merger dated as of October 28, 1996, by and
among Nextel, Dial Call Indimich, Inc., a wholly owned subsidiary of Nextel
("DCI"), and WVB pursuant to which, among other things, DCI will be merged with
the into WVB.
We hereby confirm that, in our opinion, the discussions in the Proxy
Statement/Prospectus under the headings "Summary -- Certain Federal Income Tax
Consequences" and "The Merger -- Certain Federal Income Tax Consequences" are
accurate in all material respects.
We hereby consent to the filing with the SEC of this opinion as an exhibit
to the Proxy Statement/ Prospectus. In giving this consent, we do not thereby
admit that we come within the category of persons whose consent is required
under Section 7 of the Securities Act of 1933, as amended, or the Rules and
Regulations of the SEC thereunder.
Very truly yours,
/s/ DEWEY BALLANTINE
<PAGE> 1
EXHIBIT 23.3
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Amendment No. 1 to this
Registration Statement No. 333-17173 of Nextel Communications, Inc., on Form
S-4, of our report dated March 25, 1996, appearing in the Annual Report on Form
10-K of Nextel Communications, Inc. for the year ended December 31, 1995, and to
the reference to us under the heading "Experts" in such Prospectus, which is
part of this Registration Statement.
Deloitte & Touche LLP
McLean, Virginia
December 18, 1996
<PAGE> 2
EXHIBIT 23.3
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Amendment No. 1 to this
Registration Statement No. 333-17173 of Nextel Communications, Inc., on Form
S-4, of our report dated March 20, 1996, relating to the consolidated financial
statements of Dial Page, Inc. for the year ended December 31, 1995, appearing in
the Form 8-K/A, filed on April 26, 1996 with the Securities Exchange Commission,
and to the reference to us under the heading "Experts" in such Prospectus, which
is part of this Registration Statement.
Deloitte & Touche LLP
McLean, Virginia
December 18, 1996
<PAGE> 1
EXHIBIT 23.4
INDEPENDENT ACCOUNTANTS' CONSENT
To the Board of Directors
Wireless Ventures of Brazil, Inc.
We consent to the use of our report dated May 31, 1996, except for footnote
15 which is as of June 14, 1996, relating to the consolidated balance sheets of
Wireless Ventures of Brazil, Inc. and Subsidiaries as of December 31, 1995 and
1994 and the consolidated statements of operations, stockholders' equity and
cash flows for the year ended December 31, 1995, included herein and to the
reference to our firm under the heading "Experts" in the Proxy
Statement/Prospectus.
KPMG PEAT MARWICK LLP
Washington, D.C.
December 18, 1996
<PAGE> 1
EXHIBIT 23.5
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Dial Page, Inc.
We consent to the incorporation by reference in Amendment No. 1 to the
Registration Statement on Form S-4 of Nextel Communications, Inc. of our report
dated February 17, 1995, with respect to the consolidated balance sheets of Dial
Page, Inc. and subsidiaries as of December 31, 1993 and 1994, and the related
consolidated statements of operations, stockholders'/partners' equity (deficit)
and cash flows for each of the years in the three-year period ended December 31,
1994, which report appears in the Form 8-K of Nextel Communications, Inc. dated
February 6, 1996 and filed on February 7, 1996, as amended by Form 8-K/A filed
on April 26, 1996.
/S/ KPMG PEAT MARWICK LLP
KPMG Peat Marwick LLP
Greenville, South Carolina
December 18, 1996
